Advantages of foreign trade

len Alfred Ajibola - Thu, 05th December, 2019 @ 6:30 PM

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Academic Questions in Commerce

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In commerce, which of the following is false with regards to a commodity?

  • A. A commodity must always have a market value

  • B. Rendered services are also instances of commodities

  • C. Products applicable to commodities can be bought or sold with money

  • D. A commodity must be standardized

  • E. A commodity must be usable upon delivery

  • F. Commodities can be traded in the futures market

Whatever is being marketed must always provide value to its potential consumers.

  • A. True

  • B. False

Which of the following is not a branch of marketing?

  • A. Merchandising

  • B. Promotions

  • C. Forex

  • D. Search Media Optimization

  • E. Social Media Optimization

  • F. Copywriting

Which of the following is not a characteristics of commerce?

  • A. The only aim of commerce is to make profit

  • B. It is a discontinuous process after profit had been made

  • C. It is accompanied with challenges and uncertainties

  • D. It is 100% business and economic activity

  • E. Transaction processes are always involved in commerce

  • F. It connects the process of production and marketing

Which of the following is not a function of commerce?

  • A. Unnecessary in times of emergencies like earthquakes and wars

  • B. Facilitates mass production of goods

  • C. Influences transportation network within and outside a state

  • D. Attempts to satisfy human needs and wants

  • E. Improves the standard of living

  • F. Acts as an online business link between buyers and sellers

One of the following is a form of division of labour.

  • A. Agonistic division of labour
  • B. Antagonistic division of labour
  • C. Mutualistic division of Labour
  • D. Advanced division of labour
  • E. Solitary division of labour
  • F. Occupational division of labour

A place where people buy homogenous goods in large quantities is called _____.

  • A. Wholesaler's Market

  • B. Goods Market

  • C. Products Market

  • D. General Market

  • E. Commodity Market

  • F. Forex Market

Any activity aimed at getting people interested in a company's product or service is termed _____.

  • A. Commerce

  • B. Economics

  • C. Financial Accounting

  • D. Marketing

  • E. Production

  • F. Distribution

Definition of foreign trade:

Foreign trade (or international trade) is defined as the exchange of goods, services and capital between two or more nations.

Please read the introduction to foreign trade here.

In this article, we will look into the advantages of foreign trade.

Advantages of foreign trade

The advantages of foreign trade can also be considered as the importance or benefits of foreign trade.

You can read on the disadvantages of foreign trade here.

Below are explanations on the advantages or importance of foreign trade:

1. Commodities become cheaper and available in most country

Using the sale of phones as an instance, some phones may sell for over $400 while others with a similar operating system could sell for less than $100; all thanks to foreign trade.

In simple terms, imported commodities are approved into a country because of their relative cheapness and quality when compared to locally made commodities of similar value.

Please read on the scope and importance of business studies here.


2. Utilization of mineral resources

Some developing countries are blessed with numerous natural and mineral resources. Unfortunately, they lack the facilities and machineries to make these natural resources into finished products. Foreign trade becomes important in regards to the utilization of these resources.

As an instance, Nigeria is one of the Africa's largest exporter of petroleum. In fact, the Nigerian national income is dependent on the sale of petroleum to other countries. This is what foreign trade entails.

Unfortunately, Nigeria imports the products of petroleum like petrol and kerosene at the time of publishing this article (2019). The point is: 'without foreign trade, petroleum may not have been properly utilized by Nigeria'.

On the positive side, the construction of Africa's largest refinery has commenced in Lagos, Nigeria. Aliko Dangote is the man responsible for this great development.

Please read on the generation of Petroleum via fractional distillation.


3. Consumption of variety of goods

Some of the goods and products you enjoy in your country aren't manufactured by your country. However, you enjoy these imported products; all thanks to foreign trade.

Please read on commodity market here.


4. Price reduction and stability of products

When certain products are produced in limited or insufficient amounts within a country, the price of such products will become inflated.

Through foreign trade, countries that manufacture a surplus of these products can export them at a cheaper price to those with deficits.

Please read more on supply here.

Meanwhile, understand that the above process will bring about price stability of the limited products manufactured within the country of deficit production.

Please read on the divisions of foreign trade here.


5. Improvement in the means and modes of transport

Air, water and land mode of transportation have been constantly improved on in order to encourage foreign trade.

As an instance, speed trains are constantly being developed while larger and advanced ships have been built for the sake of foreign trade.

Please read on the means and modes of transportation here.

Some countries have excellent road and rail networks that connects to neighboring countries for the purpose of improving foreign trade.


6. Means of payment

A country indebted to other countries may pay off her debts by exporting their products to these countries.

This is ideal since the indebted country may not have enough money to pay off their creditors.

Please read on the methods of payments here.


7. Specialization and division of labour

Foreign trade has brought about division of labour and specialization of production in various countries of the world.

As an instance, Nigeria, Saudi Arabia and Qatar are specialized in petroleum drilling and exportation. This singular act has generated trillions of dollars in these respective countries. In fact, this is the major source of their national revenue.

Please read more on division of labour here.


8. Alleviation of poverty and provision of jobs

Foreign trade has proven to be crucial in poverty eradication especially in developing countries. Consider the instance below:

Nigeria imports various agricultural machineries and these have proven to boost its economy, alleviate poverty and provide more jobs. This is true because Nigeria presently has more active commercial farmers, more people managing these machines and ultimately, more jobs.

Please read on functions and importance of government here.


9. Resort in times of natural calamities and wars

Shortage of food and other resources are the aftermath of wars and natural calamities like earthquakes and flood.

The above calamities will negatively and temporarily affect production within these periods. To this end, foreign trade and international aid serves as the last resort to stabilize the economy of the affected nations.

You can read on the problems of agriculture in Nigeria here.


10. International ties and cooperation

Foreign trades have brought the people of various countries together. In this regard, Nigeria has a good business and civil relationship with China.

Some Nigerians are beginning to speak the Chinese language while others have married Chinese men and women as a result of the Nigerian/Chinese trade relationship.

Please read on the various forms of marriage here.


11. Reduces monopoly and inflation in an economy

Monopoly exists where there are only few producers of certain goods and services.

Through foreign trade, citizens are free to import similar products thereby increasing the availability of substitute products in the market.

Please read on scale of preference and opportunity cost here.

When we have a variety of similar products in the market, consumers will have the option to choose. Also, monopoly of these products will be eradicated and prices will fall accordingly.


12. National well being

Without foreign trade, the citizens that make up a country may not enjoy some of the basic necessities of life, for instance food and drugs. As an instance, in Japan and UK, almost half of their food are imported from other countries.

In developing countries, certain drugs must be imported and this can be critical for national well being.

Please read on drugs and their side effects here.

Meanwhile, understand that the term 'national well being' relates to the good health of all citizens of a country.

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Amazing facts in Commerce

With Amazon Smile, you can donate 0.5 percent of your purchases to a charity of your choosing

Check it out here

The brewery, Sankt Gallen in Japan, produces a beer called Un Kono Kuro from elephant's dung

North Korea and Cuba are the only countries in the world where you can't buy Coca-Cola

Amazon is an e-commerce website launched in 1995. It did not make any profit for its first seven years.

Amazon's first profit was in 2003. Its founder 'Jeff Bezos' is the richest man in the world as at 2018/2019


prepayment is somewhat an opposition to deferred payment. This is true because the concept of prepayment oversees that the buyer makes payment beforehand and must wait to enjoy whatever had been paid for after some significant time had elapse.

In short, you can think of a prepayment as 'paying in advance'. An example is when a tenant pays in advance to a landlord for an apartment yet to be used. Another example is an online payment for items yet to be received.

Deferred payment is defined as a future payment eventually made after a buyer receives goods and services without an initial payment. Think of it as the: 'buy now, pay later' type of transaction.

From the perspective of the seller, the money yet to be received after the supply of goods or services is called an accrued revenue, unrealized revenue or accrued assets.

According to the buyer, the money yet to be paid after the delivery of goods or services is called an accrued expense. For instance, a company that owes employees salary can be said to have an accrued expense.

Please read more on deferred payment here

For an item to be considered a commodity, it must satisfy three conditions. These are:

  1. It must be standardized. In the case of agricultural commodities, they must be in their unprocessed state.

  2. It must be usable upon delivery

  3. The price of a commodity item must vary.

A commodity market can therefore be defined a place where people buy and sell homogenous goods in large quantities.

Homogeneous goods are products that essentially have the same physical characteristics (or qualities) as similar products from other brands.

It is noteworthy to state that foreign currencies, data and bandwidth have all been included as part of today's commodity markets. In this regard, a commodity market will always have it's own set of rules and regulations.

Please read more n commodity market here

Marketing is a broad field of study. Below are branches or divisions of marketing:

  • Advertising

  • Search Engine Optimization (SEO)

  • Merchandising

  • Branding

  • Promotions

  • Copywriting

  • Social Media Optimization (SMO)

  • Event planning

  • Customer Relationship Management (CRM)

  • Graphic Design

  • Internet Marketing

Marketing is defined as any activity or process aimed at getting people interested in a company’s product or service.

The processes utilized in marketing can take place via posters, public relations campaigns, handbills, social media, radio and television, buses, walls along the streets, the internet or just anywhere.

Below are some of the branches of marketing:

  • Advertising

  • Search Engine Optimization (SEO)

  • Merchandising

  • Branding

  • Promotions

  • Copywriting

  • Social Media Optimization (SMO)

  • Event planning

  • Customer Relationship Management (CRM)

  • Graphic Design

  • Internet Marketing

Please read more on marketing here