Trade and Aid to Trade – JSS2 Business Studies Lesson Note (First Term)

Trade is the buying and selling of goods and services to satisfy human wants.

Behavioural objectives

By the end of the lesson, students should be able to:

1. Define trade and state its importance.
2. Distinguish between home trade and foreign trade.
3. Explain wholesale trade, retail trade, import, export and entrepot.
4. List the aids to trade and explain each one.

What is barter?

Barter is the exchange of goods for goods, or services for services, without the use of money.

• Old practice: in the olden days, trade was carried out by the barter system.
• Example: a farmer gives yams to a fisherman in return for fish.
• Double coincidence of wants: each person must have what the other wants, which is hard to find.
• No common measure of value: it is hard to say how many yams equal one fish.
• Division problem: some goods, such as a goat, cannot be cut into smaller parts without losing value.
• Result: money later replaced barter as the medium of exchange.

Why is trade important?

Trade is important because it links producers with buyers and makes goods available to everyone.

1. Contact: it brings producer and buyer together.
2. Surplus: it helps producers sell their extra goods.
3. Less wastage: it prevents the waste of some products, such as perishable foods, by selling them quickly.
4. Marketing: it helps producers to market their goods.
5. International link: it brings two or more countries together through international trade.

What are the forms of trade?

There are two forms of trade: home trade and foreign trade.

What is home trade?

Home trade is buying and selling within the boundary of one country.

• Other names: internal trade or domestic trade.
• Examples: trade between Lagos and Port Harcourt, or between Oshodi and Idumota.
• Divisions: it is divided into wholesale trade and retail trade.

What is wholesale trade?

Wholesale trade is buying goods in bulk from the producer and selling them in smaller quantities to retailers.

• Wholesaler: the trader who does this.
• Buys from: the manufacturer or producer.
• Sells to: the retailer.

What is retail trade?

Retail trade is buying goods in small quantities from the wholesaler and selling them in units to final consumers.

• Retailer: the trader who does this.
• Buys from: the wholesaler.
• Sells to: the final consumer.

What is the difference between wholesale and retail trade?

What is foreign trade?

Foreign trade is buying and selling between two or more countries.

• Other names: international trade or external trade.
• Examples: trade between Ghana and Nigeria, or between Germany and Nigeria.
• Features: it involves different currencies and different languages.
• Divisions: it is divided into import, export and entrepot.

What is import?

Import is the bringing of goods from outside into a country.

• Examples for Nigeria: televisions, machines, vehicles and drugs.

What is export?

Export is the sending of goods from one country to another country.

• Examples from Nigeria: crude oil, cassava and cocoa sent to China.

What is entrepot?

Entrepot is the importing of goods into a country in order to export them again.

• Purpose: the goods are brought in so that they can be re-exported.

What is the difference between home trade and foreign trade?

What are aids to trade?

Aids to trade are services that make trade easy.

There are seven aids to trade: advertising, banking, communication, insurance, tourism, transportation and warehousing.

What is advertising?

Advertising is creating awareness in the mind of the public about old and new products in the market.

• Radio: reaches many people by sound.
• Television: shows the product with sound and pictures.
• Newspaper: carries printed adverts read daily.
• Magazine: carries printed adverts with colour pictures.
• Cinema: shows adverts before or between films.
• Billboard: a large outdoor board placed beside roads.
• Internet: reaches users through websites and social media.
• Journal: reaches readers in a particular profession or field.

What is banking?

Banking is making funds available for businesses and individuals.

• Loans: money lent to traders to start or expand business.
• Overdrafts: permission to withdraw more than the money in the account.
• Safe keeping: banks keep money and valuables.
• Financial advice: banks advise customers on money matters.

What is communication?

Communication is the sending and receiving of information from one place to another.

• Link: it joins suppliers with customers.
• Means: telephone, telex, internet and e-mail.

What is insurance?

Insurance is protection against risk and loss in business.

• Reason: business is full of risk.
• Marine insurance: covers goods and ships at sea.
• Motor vehicle insurance: covers vehicles against accident and theft.
• Fire insurance: covers buildings and goods against fire.
• Life assurance: pays money to the family when the insured person dies.

What is tourism?

Tourism is travelling to a place for recreation and holidays.

• Effect on trade: tourist centres increase trade activities.
• Olumo Rock: a tourist centre in Abeokuta.
• Yankari Game Reserve: a tourist centre in Bauchi State.
• Obudu Cattle Ranch: a tourist centre in Cross River State.

What is transportation?

Transportation is the carrying of people and goods from one place to another.

• Land: roads and railways, using lorries, buses and trains.
• Water: ships and boats on rivers, lagoons and seas.
• Air: aeroplanes, used for fast delivery.
• Pipeline: carries liquids and gases, such as crude oil.

What is warehousing?

Warehousing is the provision of facilities to store goods and materials until they are needed.

• Warehouse: a place where finished goods are kept until they are needed.
• Benefit: it ensures a steady supply of goods.
• Ordinary warehouse: a store kept by a trader or firm for its own goods.
• Bonded warehouse: stores imported goods until the import duty is paid.
• Public warehouse: a store that traders can use for a fee.

Evaluation

1. Define trade.
2. State the difference between home trade and foreign trade.
3. Explain entrepot trade.
4. List and explain five services that make trade easy.

Assignment

Explain five ways in which transportation and warehousing help trade, and give one example of each.