Specialization occurs when people produce a narrower range of goods and services that they consume. Specialization characterizes the actions of individuals, business firms, cities, regions, and countries. Exchange is trading goods and services with people for other goods and services or for money. The simplest form of exchange is barter - the direct trading of goods or services. Voluntary exchange gives people a broader range of choices in buying goods and services.
Interdependence results as people and nations depend on one another to provide goods and services.
Greater specialization and exchange lead to greater interdependence.