Jeff produces and consumes 2 shirts and 2 pizzas. Jointly they are producing 8 shirts and 6 pizzas. Suppose Jeff trades 4 pizzas for 3 shirts. 7 shirts and 4 pizzas. Both have increased their consumption of shirts by 1 with no less pizza.
Specialization makes trade necessary and trade requires coordination.
Individuals must specialize in what others most want. Trade must get the items to those who most want the item. Many buyers and sellers The interaction of all buyers and all sellers determine the market price. The behavior of buyers and sellers are analyzed separately. Demand describes the behavior of buyers Supply describes the behavior of sellers.