Question

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

Answer 1

Money acts an medium of exchange and eliminates the factor double coincidence of wants .
For example A shoe seller wants to buy wheat to feed his family but has only shoes and another man who has wheat but wants pots in return but the first person has no pots and only shoe .This is Double Coincidence of Wants.

Answer 2

Transactions are made in money because it can be easily exchanged for any other service or a commodity. It solves the double co incidence of wants by acting as a medium of exchange.

For example, a potter, wants to sells his pots in the market and wants to buy sugar. Under barter system, he would have to find a person who wants to purchase a pot and agrees to sell him sugar. This creates a problem which is referred as double coincidence of wants. This problem can be overcome by the use and introduction of money. The potter can now sell his pots for money and with this money, he can buy sugar.