Question

Why is trade so important?

Answer 1

Instructions:
We can start off by discussing what is trade.

After this, we can list down the types of trade briefly and then the importance of trade.


Solution:
The exchange of goods among countries, states, and people is referred to as trade. Trade is also defined as the movement of goods from the location where it is manufactured to the markets. The place where exchanges of goods take place is known as the market and these markets could be local, state, national or international depending on the demand.

International trade is carried out between two nations while trade carried on in villages, towns and cities is called local trade.

Let us now discuss why trade is so important for us.

• Countries across the world have unequal distribution of natural resources or have differences in their productivity levels. This is because each country cannot produce all that they need equally well or at equal costs.
• For example our country imports most of the raw material like mineral fuels, oil, and raw petroleum. On the other hand, our country exports wheat, rice, and medicines.
• Availability of various factors of production such as labour, capital, and raw materials are required for producing different goods.
• Moreover, labour productivity and production costs differ among nations due to various socio-economic, geographical and political reasons.

Due to these differences each country finds it advantageous to produce selected goods and services efficiently at home, and procure the rest through trade with other countries. This is precisely the reason as to why countries trade with each other.