Trade and types of trade, Trade and types of trades. Trade is part or branch of commerce or let’s say one of the main divisions of commerce.
WHAT IS TRADE?
Trade is the act of buying and selling of goods and services. The word trades also consists of a trade by barter which we will treat later on. Every human being engages in one form of trading activity or the other.
HOW CAN WE DIFFERENTIATE TRADE FROM COMMERCE?
The difference between trading and commerce is not so difficult to understand because trading is centred on buying and selling of goods but commerce encompasses buying and selling, distribution and exchange of goods and services.
Trade and commerce are closely related concepts, but they have distinct meanings and applications. While they both involve economic activities related to the exchange of goods and services, there are differences between the two:
Scope and Nature:
Trade refers to the exchange of goods and services between individuals, organizations, or countries.
It primarily focuses on the transfer of tangible products, such as goods produced or manufactured. Trade can occur at various levels, including local, national, and international.
Commerce, on the other hand, is a broader term that encompasses various activities related to the distribution, exchange, and management of goods and services.
It includes not only trades on commodities but also activities such as buying, selling, advertising, transportation, banking, insurance, and other auxiliary services that facilitate trade.
Trade mainly involves the actual buying and selling of goods and services. It focuses on the transfer of ownership and possession of tangible products from one party to another.
Commerce encompasses a wider range of activities, including trade, but also incorporates activities related to finance, banking, transportation, warehousing, advertising, marketing, insurance, and other supporting services.
The primary objective of trade is to fulfil the demand and supply requirements of goods and services in the market. It aims to ensure that goods are available to consumers who need them and that producers can sell their products.
Commerce has a broader objective of facilitating and promoting economic activities.
It aims to create a supportive environment for trade by providing infrastructure, financial services, information, and other resources necessary for efficient business operations.
Trade can occur on various scales, ranging from individual transactions between two parties to large-scale international buying and selling between countries.
It can involve wholesale trade (between manufacturers and retailers) or retail trade (between retailers and end consumers).
Commerce operates on a larger scale and involves multiple activities and transactions across various sectors.
It encompasses the overall economic system and its infrastructure, including banking, transportation, logistics, marketing, and legal frameworks.
TYPES OF TRADE
Trade which is concerned with buying and selling has two major areas we can Trade is divided into 2 groups. These groups of trade are Home trade and foreign trading.
The home trading type is divided into wholesaling and retailing type of trade. Here retail is the act of buying and selling goods in small quantities.
Retail involves small-scale businesses like hawking, petty trading and they mainly buy their goods from wholesalers and so retail is the final link in the distribution of goods channel.
Wholesaling is the type of buying and selling that engages in buying goods and services in large quantities, storing these goods, distributing them to retailers, and granting credit facilities to producers and manufacturers alike.
IMPORTANCE OF TRADE
There are several important trades which am going to list under. at least now you fully understand the term trade and commerce so let’s go on and state the various importance of trading.
Trade makes it possible that goods produced in different countries can be found in other countries other than the place of production. The importance of trade is known as the distribution
Trades make makes the exchange of goods possible like trade by barter
With the help of retail trading, consumers in remote places can get what they want to buy from hawkers and petty traders around their communities instead of going to cities looking for wholesalers.
Trade makes it possible to bye-pass trades by barter system of trading of the past where people will have to wait or go about looking for wants what they have as goods before they too can get exchange their goods
Foreign trading helps a country to earn foreign exchange from the import and export of goods and services
Some or all importance of trade can be related to commerce as trade is one of the branches of commerce in quote so the importance of trades are also that of commerce.
You can read my detailed post on foreign trade here. Check out home trade here. Trade by barter here
The exchange of goods and services refers to the process of buying and selling products and utilizing various services in an economy. It is a fundamental concept in economics and forms the basis of most economic transactions.
Goods are tangible items that can be produced, bought, and sold. They can range from everyday items like food, clothing, and electronics to more specialized products like vehicles, machinery, and furniture.
Services, on the other hand, are intangible actions or tasks performed by individuals or businesses to satisfy the needs and wants of others. Examples of services include healthcare, education, transportation, banking, and consulting.
The exchange of goods and services typically occurs through various market mechanisms. Markets serve as the meeting point between buyers and sellers, where they can engage in transactions and establish mutually beneficial agreements.
These markets can be physical locations like stores or marketplaces, or they can be virtual platforms such as online marketplaces and e-commerce websites.
In a typical exchange, a buyer offers payment, usually in the form of money, to acquire a good or service from a seller. This payment serves as the medium of exchange and is commonly referred to as the price.
The price of a good or service is determined by factors such as supply and demand, production costs, competition, and consumer preferences.
The exchange of goods and services plays a vital role in the functioning of an economy.
It allows individuals and businesses to specialize in certain activities, leveraging their skills and resources to produce goods or offer services in which they have a comparative advantage.
This specialization leads to increased efficiency and productivity, benefiting both producers and consumers.
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Exchange of goods and services refers to the process by which individuals, businesses, or governments trade products, and resources, or work with each other to meet their needs and wants.
This economic activity is the foundation of most modern economies and is facilitated through various mechanisms such as markets, bartering, or using currency as a medium of exchange.
Here\’s a breakdown of the key concepts involved in the exchange process:
Goods: Goods are tangible items that have a physical presence and can be seen, touched, and consumed. Examples include food, clothing, electronics, furniture, etc.
Services: Services, on the other hand, are intangible activities or tasks that people or businesses offer to others. Services can be professional, such as legal or medical services, or they can be more general, like house cleaning, transportation, or education.
Market: A market is a place or mechanism where buyers and sellers come together to exchange goods and services. It can be a physical location like a street market or a digital platform like an online marketplace.
Bartering: In a barter system, individuals or businesses directly exchange goods and services without using money. For example, a farmer might trade a sack of wheat with a tailor in exchange for a set of clothes.
Currency: Most modern economies use currency as a medium of exchange. Currency can be in the form of coins or paper money and is widely accepted for transactions. It facilitates the exchange of goods and services by providing a common measure of value.