Question

Explain how money can overcome the difficulties of double coincidence of wants.

Answer 1

Money effectively overcomes the issues of double coincidence of wants, which is a major problem in a barter economy. In a barter system, for an exchange to take place, both parties must want what the other has to offer at the same time and in the appropriate quantity. This is known as the double coincidence of wants, and it makes trading difficult and inefficient. 

Here's how money solves this problem:

• Medium of Exchange: Money serves as a normal instrument of transaction. With money, you don't have to look for someone who wants exactly what you have to offer in exchange for what you desire.