Exchange is the process of giving out value in order to have something of value in return. In the olden days. Barter was the main system of exchange I.e., goods for goods. But nowadays, one can exchange money for goods. Exchange arises because of excess production of goods and service.
Exchange is often regarded as an outcome of specialisation and production. They are related in the sense that production, which is the creation of goods and service, can be greatly enhanced when the process are broken into stage to be performed by different people.
Division of labour and specialisation lead to mass production. Since no individual is self-sufficient, I.e., capable of producing all his requirements, then there is need for exchange. To obtain what other people produce, one's own products must be exchanged. Specialisation therefore facilities production and trade. It increase interdependence among individuals and firms, e.g. a designer of cloths will exchange his product for food or money in for of living.
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