Trade, Exchange and Interdependence

Free market is a summary term for an array of exchanges that take place in society. Each exchange is undertaken as a voluntary agreement between two people or between groups of people represented by agents. These two individuals (or agents) exchange two economic goods, either tangible commodities or nontangible services.

Free Trade
For more than two centuries economists have steadfastly promoted free trade among nations as the best trade policy. Despite this intellectual barrage, many "practical" men and women continue to view the case for free trade skeptically, as an abstract argument made by ivory tower economists with, at most, one foot on terra firma. These practical people "know" that our vital industries must be protected from foreign competition.

The divergence between economists' beliefs and those of (even well-educated) men and women on the street seems to arise in making the leap from individuals to nations. In running our personal affairs, virtually all of us exploit the advantages of free trade and comparative advantage without thinking twice.

Spatial Economics
Producers and buyers are dispersed in space, and overcoming the distances between them can be costly. Much commercial activity is concerned with "space bridging," and much entrepreneurship is aimed at making good use of locational opportunities and cutting the costs of transport and communication. Spatial economics is the study of how space (distance) affects economic behavior.

The Importance of Trade
Trade is simply the trading of something for something else. This can be one good for another good, one good for money, one good for a service, a service for a good, money for a service, etc. You get the idea. Trade is an exchange of things.

Usually, people or civilizations trade things that they have too much of for things that they don't have enough of.

Interdependence.
Another of the most basic terms in the study of economics is Interdependence. It is a big word, but it means "dependent on others for some needs." In other words, you can't produce everything you need, rather you are dependent for many things on others.
 

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n running our personal affairs, virtually all of us exploit the advantages of free trade and comparative advantage without thinking twice.
 
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