Trade and Its Types

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Questions and Answers

What is the primary benefit of trade for a country?

Limited variety of products

Increased interdependence (correct)

Higher unemployment rates

Lack of competition

Which type of trade occurs within the same geographical country?

External trade

Wholesale trade

Retail trade

Internal trade (correct)

What does import trade refer to?

Selling foreign goods domestically

Selling domestic goods to other countries

Buying foreign goods and services (correct)

Transferring goods between local businesses

Which of the following is NOT a category of external trade?

Retail trade Signup and view all the answers

What is a potential effect of increased competition in trade?

Lower production costs Signup and view all the answers

Which of the following is a significant area of export for Ethiopia?

Fruits and vegetables Signup and view all the answers

What facilitates the agreement on price in a market?

The interaction of supply and demand Signup and view all the answers

Which of the following is a characteristic of retail trade?

Selling goods directly to consumers Signup and view all the answers

What is the definition of supply in a market context?

The amount of a good that sellers are willing and able to sell Signup and view all the answers

What does the intersection of the supply and demand curves represent?

Market equilibrium Signup and view all the answers

Which of the following is a characteristic of a competitive market?

Numerous buyers and sellers that are price takers Signup and view all the answers

In the context of producers, what is the primary function of sellers in the market?

To convert raw materials into useful products Signup and view all the answers

What was the purpose of the income tax proclamations in Ethiopia during the transitional government?

To change the income tax structure levied on agricultural activities Signup and view all the answers

What were the tax exemptions under the personal income tax according to proclamation number 30/1992?

First birr 105 from monthly income was exempted Signup and view all the answers

Which of the following statements accurately reflects the income tax structure for farmers as specified in the proclamations?

Members of agricultural producers cooperatives paid lesser fees than non-members Signup and view all the answers

What is the marginal tax rate range established by proclamation number 30/1992?

10% to 50% depending on income level Signup and view all the answers

Study Notes

Trade

Trade involves the exchange of goods and services.
Markets can be physical (e.g., retail stores) or virtual (e.g., online marketplaces).
Trade benefits nations by increasing product variety, fostering competition (lowering prices), and encouraging technological advancement.
Trade also leads to lower production costs, specialization, interdependence between partners, and increased tax revenue.
Trade can reduce the likelihood of conflict between countries.

Types of Trade

Trade is categorized as internal (domestic) and external (international).
Internal trade occurs within a country's borders and includes:
- Wholesale trade: buying and selling goods in bulk.
- Retail trade: selling goods directly to consumers.
External trade (international trade):
- Import trade: purchasing goods from other countries.
- Export trade: selling domestic goods to other countries.
- Entrepot trade: importing goods for re-export to other countries.
Ethiopia's exports are primarily agricultural products like coffee, livestock, oilseeds, pulses, fruits, vegetables, flowers, textiles, gum, spices, and minerals.

Market Forces

Exchange occurs when buyers and sellers agree on a price.
Price is determined by supply and demand.
Demand is the quantity that buyers are willing to buy.
Supply is the quantity sellers are willing to sell.
Market equilibrium is where supply and demand curves intersect.

Market Actors

Buyers (consumers) purchase goods for personal use.
Sellers (producers) create products from raw materials to meet consumer demand.

Competitive Markets

A competitive market has many buyers and sellers, each with minimal impact on the market price.
Participants in perfectly competitive markets are "price takers," meaning they accept the market price.

Ethiopian Taxes (Examples)

Early Period: Specific agricultural tax rates existed based on whether the farmer was part of an agricultural producers' cooperative, a sole peasant farmer or part of a state farm.
Transitional Government: (1991-1995) Personal income tax exempted income up to 105 Birr. Marginal tax rates ranged from 10% to 50%. Later amended to reduce exemption limit to 120 Birr.

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Description

This quiz explores the concept of trade, covering both internal and external trade types. Understand the benefits of trade for nations, including economic growth and reduced conflict. Test your knowledge of the various market forms and trade classifications.