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November 30, 2022 

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YIELD CURVE: A curve plotting the yields (or returns) on securities with different maturity lengths. The standard yield is for U.S. Treasury securities with lengths ranging from 90 days to 30 years. The five maturity lengths are usually 90 day, 180 day, 2 year, 5 year, 10 year, and 30 year. The shape and slope fo the yield curve indicates the state of the economy and what's likely to come. A normal yield curve has a slight positive slope, with slightly higher yields for longer maturity securities. A steep yield curve suggests the end of a contraction and beginning of an expansion. An inverted, or negatively sloped yield curve is the sign of an upcoming contraction.

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VOLUNTARY EXCHANGE:

The process of willingly trading one valuable commodity (good, service, or resource) for another. The key term is "willingly," which distinguishes voluntary exchanges from involuntary exchanges, such as those created by government taxes. Voluntary exchanges are the foundation of market transactions.
Market transactions rely on voluntary exchanges. Buyers voluntarily trade money for a good and sellers voluntary trade a good for money. Neither buyers nor sellers are forced to engage in the exchange. They do so of their own free will.

A Voluntary Exchange

Suppose, for example, that Edgar Millbottom, Shady Valley's resident teenage musical connoisseur, has come across a shoebox full of classic 8-track tapes, containing the memorable works of Englebert Humperdink, while rummaging through his attic. Because Edgar's musical tastes run more in the direction of rock groups like Live Headless Squirrels, he is willing and able to part with these 8-track treasures. A few phone calls, a newspaper ad, and some flyers at the mall, produce an interested party, Pollyanna Pumpernickel, who happens to be a die-hard Humperdink fan.

Edgar and Pollyanna are prime candidates for a voluntary exchange; a voluntary exchange that is beneficial to both. Edgar gives up his dust-collecting shoebox of Humperdink 8-track tapes and receives a modest monetary payment. His living standard ratchets up a notch or two. Pollyanna also benefits from this exchange. She parts with a modest monetary payment and receives a treasured set of Englebert Humperdink 8-track tapes.

Voluntary for Both

This voluntary exchange only happens if BOTH sides are agreeable. Should Edgar develop a liking for Humperdink music and is not willing to part with these items, then the exchange does not happen. If Pollyanna finds other uses for the modest monetary payment, such as repairing the hole in her roof created by an exploding hot water heater, then the exchange does not happen. Unless BOTH sides want the exchange, it does not happen.

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Recommended Citation:

VOLUNTARY EXCHANGE, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2022. [Accessed: November 30, 2022].


Check Out These Related Terms...

     | market | exchange | competition | competitive market |


Or For A Little Background...

     | allocation | three questions of allocation | price | quantity | efficiency |


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     | division of labor | private sector | capitalism | ownership and control | property rights | invisible hand | free enterprise | specialization |


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