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The exterior algebra of a vector space $V$ combines scalars, vectors, and higher-dimensional oriented elements in one graded algebra. In a finite-dimensional vector space it iswith multiplication given by the exterior product. Degree zero is the scalar field, degree one is $V$, and degree two is the space of bivectors. Multiplication adds degrees: combining two vectors produces a bivector, rather than another ordinary vector.^[ref]

The essential rule is $v\wedge v=0$. Repeating the same direction cannot produce a nonzero oriented area. Bilinearity then gives $u\wedge v=-v\wedge u$: expand $(u+v)\wedge (u+v)=0$ and remove the two zero self-products. The alternating rule remains part of the definition in characteristic two, where sign reversal alone would not force a self-product to vanish.

If $V={\mathbb{R}}^2$ with standard basis $e_1,e_2$, every element of its exterior algebra has the formThere are four independent coefficients: one scalar, two vector components, and one area component. In ${\mathbb{R}}^3$, the respective degree dimensions are $1,3,3,1$, giving eight components in total. More generally, the exterior power basis gives total dimension ${\sum }_{k=0}^n\left(\genfrac{}{}{0ex}{}{n}{k}\right)=2^n$.

This language is useful when direction and orientation matter together. Determinants measure the action on top-degree exterior powers; differential forms use exterior powers of a dual space to describe quantities integrated along paths, surfaces, and higher-dimensional regions. The Grassmann algebra viewpoint also makes the sign changes in anticommuting generators systematic. A single multiplication rule connects geometry and algebra.

The $k$th exterior power ${\Lambda }^{k}V$ is the quotient vector space of the tensor power $V^{\otimes k}$ that makes every elementary tensor with two equal factors zero. More precisely, take the quotient vector space by the linear span of all such tensors. Its elementary products $v_1\wedge \cdots \wedge v_k$ turn alternating multilinear maps into linear maps: every alternating $k$-linear map on $V$ factors uniquely through ${\Lambda }^{k}V$.^[ref]

If $e_1,\dots ,e_n$ is an ordered basis, the increasing productsform a basis of ${\Lambda }^{k}V$. There is one for each $k$-element choice of basis directions, soRepeated directions vanish; products with a different order can be sorted using their sign. Coordinate determinants distinguish the remaining increasing products, establishing linear independence.^[ref]

For $V={\mathbb{R}}^3$, a basis of ${\Lambda }^{2}V$ is $e_1\wedge e_2,e_1\wedge e_3,e_2\wedge e_3$. This explains the three bivector components in the worked example. The top exterior power ${\Lambda }^{3}V$ has one basis element, $e_1\wedge e_2\wedge e_3$, while ${\Lambda }^{4}V=0$: four independent directions cannot fit into that vector space. By convention ${\Lambda }^{0}V$ is the scalar field, even when $V$ has dimension zero.