Trade
Long ago before the advent of money, do you wonder how people got their things? Well, they had a system in place called the barter system where if a person wants something but has another thing to give, he would find a person who has the item desired while requiring the item being offered.
Thus, this collective need is what leads a person to swap their items in hand to fulfill both of their requirements. This is considered an act of trade.
What is Trade?
In simple terms, trade is basically an exchange, voluntary in nature between two parties in requirement of each other’s resources i.e. goods and services.
This system is based purely on the concept of need, having a sort of symbiotic relationship in which both benefit each other. In financial terms, trade basically refers to the sale and purchase of assets and securities between two consensual sides.
Trade Definition
The definition of trade can be simplified in a single sentence, the fulfillment of desires by two individuals or groups via the swapping of their respective material goods and services.
Trade Importance
Trade is a practice going on for centuries with its own variations and techniques. With the old barter system as mentioned earlier, the trade saw the problem that not everyone had something of desire to give in place of obtaining something, so the solution to this problem was the creation of money, in other words, a common desirable item which can be traded in place of anything for a mutually decided monetary value.
And even money has seen its fair share of design changes, from precious metals to standardized coins to cash and now in form of the new cryptocurrency or digital currency.
Not only that, trade even provides some important benefits straight off the bat. The first one is the economic growth as trade leads to an exchange of cultures and opportunities leading to strives in development. Also, it puts remote locations on the map with global recognition for each place’s strengths along with its shortcomings leading to bustling civilizations followed by betterment.
Lastly, it even improves the performance of a country in financial aspects by giving job opportunities to people and taxes to the government which will drastically improve the country’s financial standings and incomes.
Types of Trade
Trade can be ascribed to two types:
Domestic Trade
This type of trade can further be classified into two types as well:
Wholesale Trade
This type of trade is carried on by a wholesaler who is basically the middle man between retailers and producers. The producer sells his products in hefty quantities to the wholesale trader and in turn, the wholesaler sells it to the retailer which goes on to be sold to customers. This trade is practiced widely in the majority of shops
Retail Trade
Now the retail trade is carried on by a retailer who is basically the middle man between wholesalers and customers. The wholesaler sells his products in hefty quantities to the retail trader and in turn, the retailer sells them to the customers for their use. This trade acts as the second link in the journey of a finished product from the producer to the customer.
Foreign Trade
This type of trade can be classified into two types as well:
Import Trade
This type of trade is basically the transportation of goods to one’s home country, in other words, being on the receiving end of the trade between two countries. These trades require the home country to pay for the goods.
Export Trade
This type of trade is basically the transportation of goods from one’s home country, in other words, being on the giving end of the trade between two countries. These trades require the home country to charge for the goods.
Trade Advantages
A few major advantages of trade are:
- Efficiency Increase
- Natural Resources are Maximum Utilization
- Development of Sympathies and Common Interests among countries
- Development of Large-Scale Production
Trade Disadvantages
A few major disadvantages of trade are:
- Job Insecurity
- Developed Economy Dependence
- Monopoly creations
- Influence on Political Decisions
What is trade according to the dictionary?
The dictionary meaning of the word trade is the business involving selling and buying of items or goods and services.
What are the types of trade?
What are the examples of trade?
There are two major types of trade both of which have two subparts as well:
- Domestic trade
- Wholesale trade
- Retail trade
- Foreign trade
- Import trade
- Export trade
Let us suppose there are two people, Liam and Henry. Henry has food but needs wool whereas Liam has wool but needs food. So Liam and Henry will exchange food and wool with each other so that Liam gets food and Henry gets wool making both of them satisfied. This is a perfect example of trade.
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