Question

Discuss any two contingent functions of money.

Answer 1

Two contingent functions of money:

1) Assisting production decisions: The main objective of any producer is to maximise their profit. So, producers have to decide the amount of factors of production to be used in production. They have to make factor payments to those factors of production in terms of money. Thus, the money-prices of those factors help the producer to take necessary decisions.

2) Assisting consumption decisions: The main objective of any consumer is to satisfy their wants through the consumption of goods. However, the consumption of the consumer depends on the income level and money-prices of the commodities in the market. Thus, the income of the consumer and money-prices of the commodities influence the consumption decision of individuals.