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How is money beneficial in transactions?

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How is money beneficial in transactions?
  • 1 answers

Yogita Ingle 5 years, 3 months ago

Money has made transactions easy in the following way
(i) It solves the problem of double coincidence of wants by acting as a medium of exchange.
(ii) Double coincidence of wants implies a situation where two parties agree to sell and buy each other’s commodities, i.e. what one party desires to sell is exactly what die other party wishes to buy.
(iii) Money does away this tedious and complex situadon by acting as a medium of exchange that can be used for all commodities.
For example, if an ice-cream vendor wants a bicycle but the bicycle manufacturer wants clothes and not ice-creams, then the vendor can use money to obtain the bicycle.
(iv) With the help of money ice-cream vendar needs not to adhere to the bicycle manufacturer’s needs because money acts as the common medium ofexehange. Similarly, the bicycle manufacturer can then use the money to buy clothes.

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