Common Sense Economics: What Everyone Needs to Know about Wealth and Prosperity
The foundation of trade is mutual gain. People agree to an exchange because they expect it to improve their well-being. The motivation for trade is summed up in the statement: “If you do something good for me, I will do something good for you.” Trade is a win-win transaction. This positive-sum activity permits each of the trading partners to get more of what they value. There are three major sources of gains from trade.
First, trade moves goods from people who value them less to people who value them more. …
Second, trade makes larger production and consumption levels possible because it allows each of us to specialize more fully in the things that we do best relative to cost. …
Third, voluntary exchange allows firms to achieve lower per-unit costs by adopting large-scale production methods …
- When you buy something in a store, you typically say “thank you”, and the salesperson also says “thank you.” Why are you both grateful for the trade of your money for their stuff?
- When two people trade voluntarily, both are better off. As a result, between them, they have created wealth, without creating more “stuff”. How can this be?
This reading is an excerpt from Certell’s Common Sense Economics eBook. Certell offers curriculum materials and eBooks free of charge for students and teachers. Click here to download the Common Sense Economics Materials.
I’ll trade you my toy for a piece of steak [Digital image]. Retrieved from https://me.me/i/ill-trade-you-my-toy-for-please-dogs-cals-9257446