Why is trade necessary explain with example
Trade is necessary because it allows countries or individuals to access goods and services that are not available or not easily accessible in their own region. It offers a way to exchange surplus goods and resources for goods that are in demand, thus promoting specialization, economic growth, and overall higher living standards. Let me illustrate this with an example:
Consider a country that lacks natural resources such as oil, but is rich in agricultural produce. Without trade, this country would not be able to have access to oil, which is essential for various industries and transportation. However, through trade, this country can exchange its agricultural products with another country that has abundant oil reserves. In this way, both countries benefit: one gains access to oil, while the other obtains food resources. This exchange of goods allows the countries to specialize in the production of what they are most efficient at, making them more economically efficient and productive.
Additionally, trade fosters competition, leading to improved quality and lower prices for consumers. With access to a wider variety of goods from around the world, people have more choices and can enhance their standard of living.
In summary, trade is necessary as it allows countries to overcome resource limitations, promotes specialization, encourages competition, and ultimately leads to economic growth and increased welfare.