Trade involves the transfer of goods or services from one person or entity to another, often in exchange for money. Economists refer to a system or network that allows trade as a market.
An early form of trade, barter, saw the direct exchange of goods and services for other goods and services. Barter involves trading things without the use of money. When either bartering party started to involve precious metals, these gained symbolic as well as practical importance. Modern traders generally negotiate through a medium of exchange, such as money. As a result, buying can be separated from selling, or earning. The invention of money (and later of credit, paper money and non-physical money) greatly simplified and promoted trade. Trade between two traders is called bilateral trade, while trade involving more than two traders is called multilateral trade.
In one modern view, trade exists due to specialization and the division of labor, a predominant form of economic activity in which individuals and groups concentrate on a small aspect of production, but use their output in trades for other products and needs. Trade exists between regions because different regions may have a comparative advantage (perceived or real) in the production of some trade-able commodity—including production of natural resources scarce or limited elsewhere. For example: different regions' sizes may encourage mass production. In such circumstances, trade at market prices between locations can benefit both locations.
Retail trade consists of the sale of goods or merchandise from a very fixed location (such as a department store, boutique or kiosk), online or by mail, in small or individual lots for direct consumption or use by the purchaser. Wholesale trade is defined as traffic in goods that are sold as merchandise to retailers, or to industrial, commercial, institutional, or other professional business users, or to other wholesalers and related subordinated services.
Historically, openness to free trade substantially increased in some areas from 1815 to the outbreak of World War I in 1914. Trade openness increased again during the 1920s, but collapsed (in particular in Europe and North America) during the Great Depression of the 1930s. Trade openness increased substantially again from the 1950s onwards (albeit with a slowdown during the oil crisis of the 1970s). Economists and economic historians contend that current levels of trade openness are the highest they have ever been.
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