Market Exchange


Without open markets and the ability to make exchanges, an economic system could not prosper and grow. In this section I will examine important aspects of the process of market exchange.

Although exchange represents of basic activity in markets, we need to break down the theory of exchange into component parts in order to understand it fully — also to begin to understand the critical role that money plays in exchanges.

You can consider everything that you do as an exchange. You eat breakfast in the morning in exchange for hunger. You get dressed in exchange for being naked — or wearing your pajamas all day long. Then, when you go to the store, you exchange something of value for something you value more.

Since most exchanges in the modern world consist of an exchange of money for goods, I have decided to put the details of the theory of economic exchange in the category of Money & Banking. You will see from the brief outline below that my description of the theory of economic exchange leads from voluntary exchange to the use of money.