Practicing Success
Practicing Success
CUET Preparation Today
| In order to obtain a commodity, we have to give something in return. That is, we have to pay some consideration in money or money’s worth. This process is called an exchange. There can be two types of exchanges – money exchange and barter exchange. In early days, barter exchange was prevalent. Money as a medium of exchange came much later when people saw deficiencies in the system of barter exchange. For example, consider a person with excess rice in hand and who wants to exchange it for some clothes. Now searching a person who has surplus clothing and who wants to exchange it for rice only is very difficult. The search costs become restrictive as the number of individuals increase. Thus, to avoid such a problem, an intermediate good is necessary which is acceptable to both parties. Such a good is called money. |
| Which particular problem of barter system is talked about in above paragraph? |
Double coincidence of wants No incidence of wants Both of above None of above |
| Double coincidence of wants |
| Barter system assumes double coincidence of wants. That is, if one has surplus rice and wants to exchange it for clothing, he/she will find another person who needs rice and has surplus clothes. |
