The concept of Trade is centered around the simple activity of the exchange of good and/or services. These exchanges may be the ones that simply take place between two parties. The simple trade which takes place between two parties is known as bilateral trade. These exchanges may also take place amongst more than two parties.

 

These exchanges that take place amongst more than two parties is known as Multilateral trade. In its authentic and original form trade perforce used barter and the exchange of goods and services of a recognized equal value that is equally desirable to both parties.

 

Modern traders generally negotiate through the use of a medium of exchange, i.e. money. The barter system of course has become extinct now.

The invention of money and the subsequent creation of the concepts of credit, paper money and non-physical money have played pivotal roles in simplifying and promoting the development of trade

Most economists agree and accept the very obvious theory that trade benefits both parties involved in the transaction. Trade is a concept that exists largely due to the differences in the cost of production of some tradable commodity in the various locations.