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What is trade? What are the types of trade?

Last updated date: 26th Mar 2023
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Hint: Trade is a part of commerce through which a trader earns his livelihood. It is classified into two different categories.

Complete Answer: Trade in simple terms refers to the buying and selling of goods. A manufacturer sells his goods to the trader and the trader buys them and further sells them to the consumer. A trader is basically an intermediary between the consumers and the manufacturers. Trade is a part of commerce and is confined to the act of buying and selling of goods. Trade is classified into two categories - Internal and External Trade. These two types of trade are further classified into various types.
1. Internal trade is done within the same country, that is, within the same geographical boundary of a country. It is also known as domestic trade. Trade amongst the traders of Chennai, Kolkata, Delhi, Pune, Amritsar etc is an example of internal trade. It is further classified into different categories
- Wholesale trade involves the purchase and selling of goods in wholesale quantities. In this form, a large quantity of goods is generally purchased from manufacturers and then it is sold to middlemen, retailers, merchants etc who further sell these goods to the consumer.
- Retail trade is an action of selling goods directly to consumers by retailers. Generally, a retailer buys goods from a wholesaler and then sells them to the consumers. The retailer is an intermediary between a wholesaler and a consumer, and they sell goods in small quantities.
The other types of internal trade are State Trade, Inter-State Trade and Local Trade.
2. External trade-The term external itself denotes that trade occurs between two different countries in the global arena. At times it is also referred to as international trade, where both the buyer and seller reside in two different countries. External trade is further classified into different categories
- Import trade refers to the purchasing of goods or services manufactured in different countries. Goods imported from a different country are known as import trade.
- Export trade refers to the selling of domestic manufactured goods to another country. In simple terms exporting of goods to a different country is called the export trade.
- When goods imported from a particular country are re-exported to buyers in some other country, it is referred to as entrepot trade or re-export trade.

Note: A country can expand its market to the global world only through trade. So, importing and exporting goods play an important factor in the economic development of a country.