What Is Trade?
Trading is the process of buying and selling goods and services for money or value. This involves the sale or exchange of goods and services for money or the value of that money. Produced goods are first sent to a manufacturer, then to a wholesaler, then to a retailer, and finally to the final consumer.
Trade is essential for the satisfaction of human wants. Trading is not only for the sake of making profits; it is also for the benefit of consumers. Trade is an important social activity because society needs an uninterrupted supply of goods forever increasing and ever-changing but never-ending human wants. Trade began at the beginning of human history and will last as long as humans exist on Earth. Trade provides consumers with a higher standard of living. Therefore, trade plays an extremely crucial role in society.
But, wait a minute In financial or stock markets, trading refers to the buying and selling of stocks, cryptos and securities and other volatile items.
Different Types of Trade
Trade can be divided into the following two categories
- Internal or Home or Domestic trade.
- External or Foreign or International trade
1. Internal Trade
Internal trade is also known as home trade. This trade takes place within a country’s political and geographical boundaries. The trade can take place at the local, regional, or national level. For example, traders in Kolkata, Chennai, etc. Engage in trade. This is called home trade or internal trade.
Internal trade can be further subdivided into two category
- Wholesale Trade: A wholesaler is someone who purchases large quantities from producers or manufacturers and then sells them to retailers for resale to consumers. Wholesalers serve as the link between manufacturers and retailers. Because manufacturers and retailers alike depend on wholesalers, he occupies a prominent position. The wholesaler serves as an intermediary between producers and retailers.
- Retail Trade: In retail trade, lower-sized lots are purchased from wholesalers and sold to consumers in small quantities. In the chain of distribution, the retailer is the last link. He creates a connection between wholesalers and consumers. Small and large retailers operate in different ways. Retailers on the small scale include hawkers, pedlars, general stores, etc.
What is a centralised and decentralised store
2. External Trade
External trade is also called foreign trade or international trade. International trade involves the purchase and sale of goods from one country to another. An example of external or foreign trade is if Mr Ajay, a trader from Kolkata, sells his goods to Mr Sujay, who is from Paris.
External trade can be further subdivided into three categories,
- Export Trade: Trade that takes place between a trader from one country selling their goods to another country is called export trade. For example, an Indian trader sells his goods to a Bangladeshi trader.
- Import Trade: When traders in one country obtain or purchase goods from traders located elsewhere, this is known as import trade. As an example, an Indian trader purchases goods from a Vietnamese trader.
- Entrepot Trade: Entrepot trade is a method of re-exporting goods from one country after processing them in another. It can also be referred to as re-exporting imported goods that have been processed. A Vietnamese trader (from Vietnam) purchases some raw materials or spare parts from an Indian trader (from India), who then assembles, or converts, the raw materials into finished goods and then sells them to a trader in China (in China).