Almost all of the goods and services that everyone can dispose of is made available by exchange. Consider the personal situation of any of the individual members of a given society. He does not directly produce the clothes he wears, nor the food he eats. He obtains these essential goods, and others that he desires, from those who have them available 꽁머니
In many cases these goods are obtained by exchanging with individuals with whom there is no lasting relationship.
It may be asked: why are some individuals induced to provide others with the goods they need?
There are several possible answers. Anyone who provides something to others from which he himself derives benefit could do so out of generosity, or because he will receive, in the immediate or future, something in return.
Advantages of the exchange – an example
It is easy to construct some examples to show how under very general conditions individuals can trade for mutual benefit. Consider 2 individuals (A and B) and suppose that they intend to agree to exchange a good x in the availability of A.
Suppose A values $ 10 for the good x in its possession. This means that if A received more than € 10 to give up good x, she would improve her position. Economists denote Willingness To Accept (WTA) the smallest amount of money A is willing to accept to trade. In the example it is equal to € 10. A is indifferent between good x and the sum of € 10.
On the other hand, suppose that B values € 30 for good x in A’s possession. This means that if B paid less than € 30 to obtain good x from A, it would improve its position. Economists denote Willingness To Pay (WTP) the largest amount of money B is willing to pay to trade. In the example it is equal to € 30. B is indifferent between good x and the sum of € 30.
The advantages that can be obtained through the exchange depend on this asymmetry between the willingness to accept of one party and the willingness to pay of the other.
This asymmetry can generate a surplus that exchange participants take advantage of to improve their position.
Advantages of the exchange – an example
If B’s willingness to pay is greater than A’s willingness to accept then there is room for a mutually beneficial trade to take place. In fact, suppose that the two individuals agree to carry out the exchange at a price equal to € 20.
