Question

How can money easily exchange it for goods or services? Give example to explain.

Answer 1

Money acts as a medium of exchange that can be used for one and all commodities  & solves the problem of double coincidence of wants. Double coincidence of wants  implies a situation where two parties agree to sell and buy each other’s commodities., i.e., what one party desires to sell is exactly what the other party wishes to buy. For example, if an ice-cream vendor wants a bicycle but the bicycle manufacturer wants clothes, and not ice-creams, then the vendor can use money to obtain a bicycle. He does need to adhere to the bicycle man’s needs because money acts as the common medium of exchange. Similarly, the bicycle manufacturer can then use the money to buy clothes.