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Question
Explain how money can overcome the difficulties of double coincidence of wants.
Solution
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.
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RELATED QUESTIONS
Read the following dialogue between two people:
| Sita: | I want 1 kg of potatoes. |
| Rani: | What will you give in exchange? |
| Sita: | I can give you 2 litres of milk in return for the potatoes. |
| Rani: | I don't need milk, I want a pair of shoe. |
Which of the following problem is being faced by Sita and Rani in their exchange process?
Which of the following is not a problem of barter system of exchange?
State two difficulties of barter system.
How does money resolve the problem of double coincidence of wants?
Enumerate any two difficulties faced under the barter system of exchange.
What is meant by double coincidence of wants?
