• Unit 5: Economic Exchange

    In the fifth unit we discuss the concept of trade, and the economic rationale for engaging in trade. We discuss the concepts of absolute advantage and comparative advantage, and the benefits from specialization and the division of labor. We conclude this unit by discussing the important concept of the extent of the market, and why the larger the market, the more opportunities for mutually-beneficial exchange exist.

    Completing this unit should take you approximately 3 hours.


    • Upon successful completion of this unit, you will be able to:

      • Explain why people engage in exchange and what the main benefit of trade is.
      • Explain the difference between coercion (or violence) and voluntary exchange.
      • Differentiate between absolute and comparative advantage, and how each affects production and trade.
      • Outline the main drivers of specialization in terms of the division of labor.
      • Explain why markets increase productivity.

    • 5.1: Trade Lecture

      • 5.1: Lecture Page

        Why do people engage in exchange among themselves and why is this so prevalent all over the world? Every day billions of strangers deal with other strangers and arrive at mutually beneficial trades. Watch this lecture to understand why this is the case, by exploring how trade is another method humans have found to increase the value and productivity of their time. You are encouraged to think of the benefits of trade by analyzing how your life would look if you had to rely on yourself to secure their needs for one day. Topics covered include: Coercion • Voluntary exchange • Economic exchange • Absolute Advantage • Comparative Advantage • Specialization and the division of labor • Drivers of specialization • Importance of capital accumulation • Why larger markets raise productivity of human action

    • 5.2: Trade Discussion

      • 5.2: Discussion Page

        Since you have watched the video lecture for unit 5, it's time to watch Dr. Saifedean moderate a discussion on the unit's theme by addressing questions asked by your fellow classmates. As you watch the discussion unfold, take notes to help you retain information. Make sure you watch the entire discussion seminar video, otherwise you may skip over important points. To get the best learning experience and mastery of the major concepts covered in this unit, you'll want to watch all videos in their entirety,


    • 5.3: Trade Review

      • 5.3 Review: Interpersonal exchange Page

        This resource contains a summary of some of the key concepts discussed in unit 5. Don't skip ahead - the information on this page is easier to understand if you have watched the video lecture and discussion seminar video in their entirety. Bookmark this resource to keep it handy during studying.