Social Science (087) — AI-generated practice question

Double coincidence of wants is a situation in a barter system where both parties in an exchange must want exactly what the other has to offer. For example, a shoe manufacturer who wants wheat must find a farmer who not only sells wheat but also wants to buy shoes.

This is a major problem in barter because such a match is very difficult to find, making exchange slow and inconvenient.

In a money-based economy, this problem does not exist. Money acts as a medium of exchange — an intermediate step. The shoe manufacturer simply sells shoes for money, then uses that money to buy wheat from anyone. There is no need for both wants to coincide simultaneously.

Source: Chapter 3 — Money as a Medium of Exchange

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• 1 mark for correctly defining double coincidence of wants (with an example for clarity).
• 1 mark for explaining why it is a problem in barter (hard to find a matching pair).
• 1 mark for explaining how money eliminates this problem (acts as medium of exchange — the intermediate step).

The textbook's own example (shoe manufacturer + wheat farmer) is the safest to use. The key phrase examiners look for is "medium of exchange" — always include it.