Question
Explain any one problem faced in the barter system. How has money solved this problem?
Double coincidence of wants means what one person wants to sell and buy must coincide with what some other person wants to buy and sell. ‘Simultaneous fulfilment of mutual wants by buyers and sellers’ is known as double coincidence of wants.
There is lack of double coincidence in the wants of buyers and sellers in barter exchange. The producer of jute may want shoes in exchange for his jute. But he may find it difficult to get a shoe-maker who is also willing to exchange his shoes for Jute.
Thus, a seller has to find out a person who wants to buy seller’s good and at the same time who must have what the seller wants. This is called double coincidence of wants which is the main drawback of the barter exchange.
Money as medium of exchange solves the barter’s problem of lack of double coincidence of wants as money has separated the acts of sale and purchase. You can sell goods for money to whosoever wants it and with this money you can buy goods from whosoever wants to sell them.
Money is accepted as medium of exchange. People exchange goods and services through medium of money when they buy goods or sell goods. Thus, money becoming intermediary solves barter’s problem of double coincidence of wants.
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