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How does money solve the problem of double coincidence of wants ? Explain with an example of your own.


Double coincidence of wants is an essential feature in a barter system where goods are directly exchanged without the use of money. But on other hand in an economy where money is in use, money by providing the crucial intermediate step eliminates the need for double coincidence of wants. A person holding money can easily exchange it for any commodity or service that he or she might want.

For example: It is no longer necessary for the shoemaker to look for a farmer who will buy this shoes and at the same time sell him rice. All he has to do is find a buyer for his shoes. Once he has exchanged his shoes for money he can purchase rice or any commodity in the market.

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In situations with high risks, credit might create further problems for the borrower. Explain.


How do banks mediate between those who have surplus money and those who need money?


Look at a 10 Rupee note. What is written on top? Can you explain this statement?


Why do we need to expand formal sources of credit in India?


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