HOME TRADE - KCSE Business Studies Notes

Meaning of Trade

​This is the buying and selling of goods and services with the aim of making a profit.

Importance of trade:

Trade plays a vital role in any economy. The various roles played by trade in the economy include;

1. Helps people to acquire what they cannot produce
2. Avails a variety of goods and services thereby improving the peoples living standards
3. Creates an outlet for goods thereby enabling the producers to dispose of their surplus produce
4. Creates employment opportunities
5. Encourages specialization and division of labour
6. Promotes peace, social relations and understanding the parties involved since they depend on one another.
7. Provides revenue to the business and the government in form of taxes and fees charged on the various trading activities
8. Ensures steady supply of goods and services
9. Exploitation of local resources as traders create goods and services using locally available resources
10. Encourages economic growth and development.

Classification of Trade

Trade can be classified on the basis of geographical location of the portion involved, these are;
1. Home trade
Also called internal, local or domestic trade. It refers to the buying and selling of goods and services within the boundaries of a given country.
It is further divided into retail trade and wholesale trade.
2. International trade (foreign trade)
This is trade that is carried out beyond the boundaries of a country
This is trade carried out between individuals or government of different countries e.g. trade between a citizen of Kenya and a citizen of Tanzania, or trade between the government of Kenya and the government of Southern Sudan
International trade carried out between two countries is referred to as bilateral trade and international trade carried out among many countries (more than two countries) is referred to as multilateral trade.
International trade is classified into the following;

1. Export Trade-Which is the sale of goods and services by a country to another country or individuals in one country to another country or individuals in one country to individuals in another country.
2. Import Trade-Which is the buying of goods and services by one country from another country or by individuals in one country from individuals in another country.

Manyam Franchise

Forms of Home Trade

1. Retail Trade
2. Wholesale Trade

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