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 Form 4 Geography online lessons on trade

Factors Influencing Trade

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Answer Text:
Factors Influencing Trade
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 over long distances from producers to consumers. 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 four 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 Blocs 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 - Liberalize trade among members and raise tariffs for non-members.