List the factors Influencing trade

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1. Difference in natural resources which makes it necessary to trade with other countries or areas in order to obtain goods and resources which are not found in their area.

2. population whereby large population or one with high purchasing power provides a large and ready market for goods and services encouraging trade.

3. Trade occurs when there is demand and supply of goods and services.

i. If the supply is low and the demand is high, prices go up stimulating trade.

ii. When the supply is more and the demand is low, prices go down discouraging trade.

4. Adequate and efficient means of transport and communication encourage trade because bulky goods can be transported quickly and overlong distances from producers to consumers. Poor transport discourages trade due to the difficulty in getting goods to the market in time. Goods can be supplied faster when traders communicate with suppliers without having to travel a lot which reduces travelling cost and hence increasing profits.

5. Trade restrictions can encourage or discourage trade. They are of two types:

- Tariffs- taxes or duties levied by a country on a particular type of commodity imported in order to protect its domestic industries.
- Quotas-specified quantities of goods which must not be exceeded during importation or exportation.
- Trade Agreements-agreements made between countries regarding which commodities are exported or imported from specific countries.
- Total Ban-complete restriction of importation of a particular commodity in order for a country to protect its domestic industries or due to political hostility.

6. Trading Blocks or economic Unions/Associations among countries aimed at promoting regional trade among members states can encourage trade between members and discourage trade with non
members.

-Free Trade Associations-liberalise trade among member countries by lowering and abolishing tariffs.
- Common Market Associations-liberalise trade among members and raise tariffs for non members.

7. Trade can only take place between countries only when they are in good terms. Hostility leads to total ban as was the case with s. Africa during apartheid and Iraq when it attacked Kuwait and failed to destroy weapons of mass destruction.

8. Existence of aids to trade e.g.

- Banking facilitates storage and transfer of money used in trade transactions
- Insurance protects businesses against theft and destruction from fire which instills confidence among investors.
- Warehouses are essential for storage of large quantities of goods for sale.

marto answered the question on March 28, 2019 at 11:38

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List the factors Influencing trade

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