Question

Define or explain the following concept:

Double coincidence of wants

Explain double coincidence of wants.

Answer 1

It implies that the needs of any two individuals should complement each other for the exchange to take place. That is, the commodities owned by two different individuals are required by each other.

Answer 2

1. A double coincidence of wants is a situation in a barter system where two individuals each possess a good or service that the other wants, and they are willing to exchange them directly.
2. For example, if a farmer has wheat and wants shoes, and a shoemaker has shoes and wants wheat, then an exchange can take place. This mutual need is called a double coincidence of wants.
3. This was a major limitation of the barter system and led to the evolution of money as a common medium of exchange.