Conclusion

You should now understand more fully the benefits of living in an interdependent economy- When Americans buy tube socks from China, when residents of Maine drink orange juice from Florida, and when a homeowner hires the kid next door to mow the lawn, the same economic forces are at work. The principle of comparative advantage shows that trade can make everyone better off.

Having seen why interdependence is desirable, you might naturally ask how it is possible How do free societies coordinate the diverse activities of aII the people involved in their economies? What ensures that goods and services will gel from those who should be producing them to those who should be consuming them? In a world with only two people, such as the rancher and the farmer, the answer is simple: These two people can bargain and allocate resources between themselves. In the real world with billions of people, the answer is less obvious. We take up this issue in the next chapter, where we see that free societies allocate resources through the market forces of supply and demand.

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