ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Trade refers to the voluntary exchange of goods or services between economic actors. Since transactions are consensual, trade is generally considered to benefit both parties.

Detailed explanation-2: -The given statement is TRUE. Individuals will take part in voluntary exchange only when they feel they are serving benefits from the trade that exceed the costs of the trade. Voluntary exchange is mutually beneficial because it helps both buyers and sellers gain benefits.

Detailed explanation-3: -The terms of trade are mutually beneficial as long as they are between the two countries’ opportunity costs. For example, any amount of medicine greater than 1/3 and less than 1 traded for 1 cotton shirt would represent mutually beneficial terms of trade.

Detailed explanation-4: -The great economist Frank Knight once stated simply: “An exchange is an exchange is an exchange; it is voluntary and mutually beneficial.” This is perhaps the first lesson most students learn in economics.

Detailed explanation-5: -Voluntary exchange is a transaction where two people trade goods or services freely, there is no coercive or restrictive force involved in the transaction. Both parties want to make the exchange items, and both parties will benefit from the trade. Voluntary exchange is an essential concept in the free market economy.