For barter to be possible between two people, it must be the case that________________________. Select the...

For barter to be possible between two people, it must be the case that________________________.

Select the correct answer below:

there is a double coincidence of wants

at least one of the two people has money to pay for the good or service that the other offers

at least one of two people wants what the other one has

none of the above

Expert Solution

Answer- there is double coincidence of wants.

Barter system refers to the system of exchange where goods and services are exchanged directly for other goods and services. For barter to be possible between two people, it is important that there is double coincidence of wants. Double coincidence of wants means that what one person wants to sell and what other person wants to buy is exactly the same. Two people desire to purchase each other's good. If two persons do not desire to purchase each other's good , then barter becomes impossible. For example- if a farmer produces rice and has in excess of his consumption, he may exchange it for some other good such as cloth( which he requires but does not produce himself). Thus, farmer exchanges rice for cloth. This is barter system. But for barter to be possible it is necessary that there is double coincidence of wants i.e., both the person desire to purchase each other's good. In this example, barter is possible when cloth Weaver desires to purchase rice of farmer . Then there would be double coincidence of wants - farmer wishes to buy cloth in exchange for rice and cloth Weaver wishes to buy rice in exchange for cloth.

Option b is incorrect because in barter system, money was not the medium of exchange. Goods and services were exchanged directly for other goods and services.

Option c is incorrect because barter system requires that both the people involved in exchange wants what the other has. If one of them does not desires to purchase other's good, then barter is not possible. In our example, if the cloth Weaver does not wishes to buy rice in exchange for cloth, then barter is not possible between farmer and cloth Weaver.

Rahul Sunny answered 2 years ago

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