Trade and Its Types

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.