Menger explains exchange as a means of satisfying needs more effectively through trade, where each party subjectively values what they receive more than what they give up. Historically, exchange evolved from barter to monetary systems, facilitating the division of labor and increasing productive efficiency. Prices, as exchange ratios, arise in each market from the subjective valuations of buyers and sellers, and they are governed by the law of supply and demand. They also play a coordinating role between markets by enabling entrepreneurial activity to adapt the economic system to dynamic changes in consumer demand, technology, and resource availability—as explained by the principle of profit rate equalization.