Answer: Barter is the direct exchange of one good or service for another. Barter is inefficient because it requires a "double coincidence of wants," that is, the good one person offers for exchange must be the good the trading partner wants and the trading partner's good must be what the first person wants. The existence of money means that we do not need to engage in barter. Instead, we can sell a good or service for money and then use the money to purchase another good or service we desire. There is no necessity for the "double coincidence of wants" because the seller is willing to accept money from any buyer.
Answer:
ReplyDeleteBarter is the direct exchange of one good or service for another. Barter is inefficient because it requires a "double coincidence of wants," that is, the good one person offers for exchange must be the good the trading partner wants and the trading partner's good must be what the first person wants. The existence of money means that we do not need to engage in barter. Instead, we can sell a good or service for money and then use the money to purchase another good or service we desire. There is no necessity for the "double coincidence of wants" because the seller is willing to accept money from any buyer.