SOCIAL SCIENCES3rd eso

WHAT IS TRADE?

Trade is the buying and selling of goods to meet the needs of a population. The

trading of goods is an ancient activity that established links between different

cultures a long time ago.

Trade was first carried out through a system of bartering (exchanging certain

goods for others). Once money appeared, goods were given a more exact value,

trading opportunities grew and people started to do business with communities

that lived further and further away.

TYPES OF TRADE

Trade can take place within the same country or between different countries:

Domestic trade takes place within the same country. There are two types:

o Wholesale. Wholesalers buy large quantities of goods and sell them

to other companies. Individual consumers do not have access to the

markets where wholesalers buy their goods.

o Retail. Retail outlets sell small quantities of goods directly to

consumers. Examples include supermarkets, shoe shops, bakeries

and the shops in shopping centres.

International trade takes place between countries. It includes the sale of

products made domestically (exports) and the purchase of products made

in a different country (imports). The balance of trade is the difference

between the monetary value of the exports.

THE ELEMENTS OF TRADE

To function effectively, trade requires:

Sellers: people or companies that sell goods

Buyers: people or companies that buy goods from the sellers

Goods: the products that are exchanged. Today goods have a monetary

value

A market: the place where the buying and selling takes place. They can be

tangible markets that sell products (shops or supermarkets), or abstract

(markets) when the actual product is not there (stock markets or the

international oil market).

ACTIVITIES

1) After reading the text, explain the processes involved in buying and selling a car:

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2) What is trade? Copy and complete the table:

Domestic International

Takes place

Types

3) Why do you think that bigger shops are often more successful than smaller shops?

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4) How can governments protect the interests of smaller business? How has the economic crisis that started in 2008 affected to medium-sized businesses? Discuss.

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THE BALANCE OF TRADE

The balance of trade is the difference between the value of goods that a country

exports and those that it imports. It can be:

Positive: the value of exports (goods sold to other countries) is higher than

the value of imports (goods bought from other countries).

Negative: the value of imports is higher than the value of exports.

The balance of trade only includes the exchange of material goods, which is just

one part of international trade. We must look at the balance of payments in

order to see the whole picture.

ACTIVITIES

1) Explain what a country's balance of trade is:

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2) When do we say it is positive? When is it negative?

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THE BALANCE OF PAYMENTS

The balance of payments is a record of all monetary transactions between a

country and the rest of the world. This includes products (goods), services

(tourism, transport) and capital (financial transactions). It can be in:

Surplus. The balance of payments is in surplus when a country's income is

higher than its expenditure.

Deficit. The balance of payments is in deficit when a country's expenditure

is higher than its income. This means that a country could have a negative

balance of trade and a balance of payments that is in surplus due to

income brought in by tourism.

ACTIVITIES

1) Explain what the balance of payment is:

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2) What causes a surplus? And a deficit?

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3) How is the balance of trade different from the balance of payments?

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4) In 2009, imports in Spain totalled 270437 million euros, and exports 248884 million euros. Answer these questions:

- Why is the balance of trade in Spain negative?

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- Find out what products or services Spain imports:

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- What products or services does Spain mainly export? What measures do you think could be taken to improve its balance of trade?

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5) How can tourism increase a country's balance of payments?

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