Trade involves the transfer of goods or services from one person or entity to another, often in exchange for money. A system or network that allows trade is called a market.
An early form of trade, barter, saw the direct exchange of goods and services for other goods and services.[need quotation to verify] Barter involves trading things without the use of money. Later, one bartering party started to involve precious metals, which gained symbolic as well as practical importance.[citation needed] Modern traders generally negotiate through a medium of exchange, such as money. As a result, buying can be separated from selling, or earning. The invention of money (and later credit, paper money and non-physical money) greatly simplified and promoted trade. Trade between two traders is called bilateral trade, while trade involving more than two traders is called multilateral trade.
Trade exists due to specialization and the division of labor, a predominant form of economic activity in which individuals and groups concentrate on a small aspect of production, but use their output in trades for other products and needs. Trade exists between regions because different regions may have a comparative advantage (perceived or real) in the production of some trade-able commodity´including production of natural resources scarce or limited elsewhere, or because different regions' sizes may encourage mass production. In such circumstances, trade at market prices between locations can benefit both locations.
Retail trade consists of the sale of goods or merchandise from a very fixed location (such as a department store, boutique or kiosk), online or by mail, in small or individual lots for direct consumption or use by the purchaser. Wholesale trade is defined[by whom?] as traffic in goods that are sold as merchandise to retailers, or to industrial, commercial, institutional, or other professional business users, or to other wholesalers and related subordinated services.
Today, trade is merely a subset within a complex system of companies which try to maximize their profits by offering products and services to the market (which consists both of individuals and other companies) at the lowest production cost. A system of international trade has helped to develop the world economy but, in combination with bilateral or multilateral agreements to lower tariffs or to achieve free trade, has sometimes harmed third-world markets for local products.