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In: Finance

Explain how money solves the problem of the "double coincidence of wants."

Explain how money solves the problem of the "double coincidence of wants."

Solutions

Expert Solution

Double coincidence of wants implies a situation in which two party are agreeing to sell and buy each others commodity and what the one party is trying to sell, the similar party is exactly wanting to buy.

Money solves the problem of double coincidence of wants because money is acting as a medium of exchange between both the parties as money can be used as a medium of exchange for all the commodities and it will be helping in exchanging of different complex commodities and it would be leading to a proper transaction.

Hence, it can be said that money eliminates the problem of double coincidence of wants by acting as a universal measure of exchange.


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