ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -People voluntarily exchange goods and services because they expect to be better off after the exchange. When people buy something, they value it more than it costs them; when people sell something, they value it less than the payment they receive.

Detailed explanation-2: -Voluntary exchange is important because it lets everyone pursue their interest. It promotes economic activity and growth. It also allocates resources in a way that will benefit society. Thus, voluntary exchange is essential for a free market economy.

Detailed explanation-3: -Voluntary exchange is a type of transaction where two parties freely trade goods or services. This occurs in a market economy, which is a type of economy where both participants of an interaction gain a mutual benefit from it and are better off than when they started.

Detailed explanation-4: -The principle of voluntary exchange is based on consumers and producers acting in their self-interest. A voluntary exchange between a consumer and a producer makes both parties better off than they were before the exchange.

Detailed explanation-5: -Opportunity cost refers to what you have to give up to buy what you want in terms of other goods or services. When economists use the word “cost, ” we usually mean opportunity cost.