A trade is an interaction between two countries or regions involving the buying of imports of goods and services from overseas, and the selling of exports of goods and services abroad. These trades enable countries, or perhaps regions, to experience with various products that cannot be produced in each of their countries or regions. Trading goods and services are exchanged at the place called markets. There are two laws of trade called the law of absolute advantage and law of comparative advantage. For Australia, we take about 1% of the trade in global as Australian economy relies on trading.
When people say ‘trade’ with others, it simply applies to any business of selling and buying goods through using monetary value to purchase or in some case exchange a good for a good. Trade usually refers to an interaction of two countries, regions or even two shop owners that involves the exchange of goods and services by using ‘free trade’ or monetary value. Place we trade is called a ‘market’. For example, a fruit and vegetable market trades goods such as an apple, etc. Or, trade can refer to a baker who trades money for flour or wheat. However, we do not tend to trade because of the needs of other goods and services that we can not produce. Also, trade helps with increase of GDP, employment, incomes, wider range of choices in products, living standards and decreases inflation. We tend to trade because of the benefits we all can share around that will eventually make both side of trading relationships to gain advantages. This is called the law of comparative advantage. This principle notes that a nation should ‘specialise’ in those select areas of production in which it has the least cost of producing. By doing this, opportunity cost should be max ...