An individual himself is not capable of producing all goods and services which he needs for the satisfaction of wants. He depends upon others. If you are a teacher, students depend upon you for their education. You, on the other hand, depend upon a baker for the bread, a tailor for stitching your clothes, a maidservant for domestic help, and so on. Thus, mutual interdependence is the essence of economic activity. Mutual interdependence leads to exchange. Accordingly, we can say that mutual interdependence and exchange are the core elements of an economy.
A simple economy is the one in which the degree of ‘interdependence and exchange' is of a moderate degree. Every individual in the community is occupied in the manufacturing of some goods or services and they require an amalgam of many goods and services not all of which are produced by them.