Suppose “P” is a farmer who grows wheat and “S” is a tailor who makes clothes. They both need each other’s products, but they do not have a common measure of value to exchange them. This means that “P” has to find out how much wheat is equal to one shirt, and “S” has to find out how many shirts are equal to one quintal of wheat. This is a difficult and time-consuming process that may not lead to a satisfactory trade.
What is this situation called?
Double coincidence of wants
Answer by Student
So, the correct answer is (B): Double coincidence of wants
Detailed Explanation by Teachoo
Let’s check all the options
- Option (A) Commodity money - Commodity money is a type of money that has some intrinsic value, such as gold, silver, salt, etc. It is different from fiat money, which is money that has no intrinsic value but is accepted by law, such as paper notes and coins. So, this is incorrect .
- Option (B) Double coincidence of wants - This is the term used to describe the situation in economics where two people who want to exchange goods or services must have a mutual demand for each other’s products. This is a difficult and time-consuming process that may not lead to a satisfactory trade. So, this is correct .
Option (C) Credit system
- Credit system is a system where goods or services are exchanged for a promise to pay in the future. It involves the use of credit instruments, such as cheques, bills of exchange, etc. It reduces the need for money as a medium of exchange. So, this is
- Option (D) Money system - Money system is a system where goods or services are exchanged for money as a medium of exchange. It eliminates the problem of double coincidence of wants and makes trade easier and faster. So, this is incorrect .
Thus, option (B) is correct .