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Trade Unit 10

Trade is the exchange of goods and services between countries, essential for meeting the needs of nations that cannot produce everything they require. Key economic terms related to trade include GDP, GNP, exports, imports, and exchange rates, which help in understanding the economic implications of trade activities. Pakistan's major exports include cotton products and leather, while it imports machinery and petroleum, often resulting in a negative balance of payments due to higher imports than exports.

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8 views

Trade Unit 10

Trade is the exchange of goods and services between countries, essential for meeting the needs of nations that cannot produce everything they require. Key economic terms related to trade include GDP, GNP, exports, imports, and exchange rates, which help in understanding the economic implications of trade activities. Pakistan's major exports include cotton products and leather, while it imports machinery and petroleum, often resulting in a negative balance of payments due to higher imports than exports.

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sobiafarhan013
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© © All Rights Reserved
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Unit: 10

Trade
Prepared by: Miss Faiza Sheikh
What is Trade?
- The exchange of goods and services
between different areas or countries is
called trade.
- The activity of buying and selling, or
exchanging goods / or services between
people or countries. (Cambridge
Dictionary)
Why countries need to Trade?
 No country in the World is self-sufficient in all
commodities that are needed by its people
 Every country has some commodities that they need
to buy from other countries. Its reasons include:
 As they can not grow or produce it.
 It is too expensive to grow those products
 The country does not have raw materials or equipments that
are needed to produce or grow a certain commodity.
 It also increase employment opportunities.
Important Economic Terms to
understand concept of Trade
 1. Gross Domestic Product (GDP)
The total market value of all final goods and services produced within a
country in a given period (usually a year). GDP is used to measure a
country's economic performance.
 2. Gross National Product (GNP)
The total market value of all goods and services produced by the residents
of a country in a given period, including those produced abroad. GNP adds
income earned by residents from overseas investments but subtracts
income earned by foreigners within the country.
 3. Per Capita Income
The average income earned per person in a specific area (country, city,
etc.) over a certain period. It is calculated by dividing the total income of a
region by its population, providing an indicator of the standard of living.
Important Economic Terms to
understand concept of Trade
4. Inflation
 The rate at which the general price level of goods and services
in an economy rises over a period, resulting in a decrease in the
purchasing power of money.
5. Exports
 Goods or services produced in one country and sold to buyers in
another country. Exports bring money into the exporting country.
6. Imports
 Goods or services bought by a country from another country.
Imports result in money leaving the importing country.
7. Exchange Rate
 The value of one country's currency in relation to another's.
Exchange rates affect the cost of imports and exports and are a
key factor in international trade.
• Specialization of production
• Promotes Industrialization
• May lead to rise in GNP
• Economies of Scale on large
scale production
Benefits • Utilization of domestic
resources for export items
of Trade • Creation of employment
opportunities
• Transfer of Information
Technology
• Production of Value-Added
Goods
Exports and Imports

 Every country needs to trade in order to survive.


 Each year millions of commodities are sold and
purchased between different countries.
 Goods or services produced in one country and sold to
buyers in another country is called export.
 Exports bring money into the exporting country.
 Goods or services bought or purchased by a country
from another country is import.
 Imports result in money leaving the importing country.
Major Exports of Pakistan
 Cotton Products – 58.4 %
 Leather – 6.1%
 Synthetic Textile – 1.2%
 Rice – 6.9%
 Sports Goods – 1.9%
 Others – 25.5%
Major Imports of Pakistan

 Wheat, Edible Oil, Sugar Pulses, Etc.


 Machinery for textile, electrical, construction,
mining and agricultural
 Petroleum and petroleum products
 Textile eg. Synthetic Fibres
 Fertilizers and other chemicals
 Metals e.g. iron, and stell
Pakistan’s Major Trading
Partners
Share of Pakistan’s Trade with
Trading Partners
Balance of Payment / Balance of

Trade
Balance of Payment is the difference in value between a country's exports
and imports over a certain period.

Balance of Payments (BOP) = Value of Exports – Values of Imports

 A positive balance in volume (more exports than imports) is called a Trade


Surplus.
A positive balance in value (more exports than imports) is called a Favorable
Balance.

 While a negative balance in volume (more imports than exports) is called a


Trade Deficit.
 A negative balance in value (more exports than imports) is called a Un-
favorable Balance.

“Pakistan always had a negative / unfavorable balance


because value of its exports exceeds that of its
exports.”
Causes of Negative Balance of Payments

Low
Exports
Import of Import of
Capital
Goods Negati Food
Items

ve
Import of
luxury
Balanc Lack of
Quality
items
e of Control

Payme Internatio
Rise in Oil
Price ntHard
nal
Restrictio
ns
Competiti
on in
World
Market

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