Classification of Trade

Trade - Meaning

The buying and selling of goods and services consists of trade. The essence of trade is to make goods and services available to those persons who need them and are able and willing to pay for them. Trade is conducted in order to earn profit. Trade acts as an intermediary in the exchange of commodities between the producer and consumer.

Classification of Trade

On the basis of geographical location of buyers and sellers, trade can be broadly classified into two categories;

1.        Internal trade and

2.        External trade

Internal Trade – Meaning

Buying and selling of goods and services within the boundaries of a nation are called internal trade. It takes place between buyers and sellers in the same locality, village, town or city or in different states, but definitely within the same country. Internal trade is also called domestic trade or home trade.

Foreign trade - Meaning

Foreign trade is a trade between a seller and buyer of different countries. It involves the exchange of goods and services of one country with another country. Mostly shipping and air transports are used for carriage of goods in international trade. The currencies of trading nations and commonly agreeable currency if any to both may be used in the said international trade.

E.g., Petrol and Aeroplanes.