Question

What is meant by double coincidence of wants?

Answer 1

Hint: Human wants are unlimited but there are only limited resources available to fulfil such wants. These resources also have alternate uses and can thus be used to satisfy one way or another. Through economics, we can achieve optimum utilisation of these scarce resources to satisfy unlimited wants.

Complete Step by Step answer: Double coincidence of wants means that two parties have two different goods or services that the other requires and can thus happily exchange them. This takes place in a barter economy where goods and services are exchanged for other goods and services. This also counts as one of the limitations of a barter economy. A double coincidence of wants would qualify as perfect barter. However, because this is extremely rare now, the modern economic system uses money which is used as an economic unit for exchange and transactional purposes. It solves the problem which can arrive out of a lack of double coincidence of wants and eliminates a significant transaction cost in barter economies.

Note: Supply and demand form the basic model of price determination in economics. The quantity of a commodity that a producer decides to sell at various prices is called supply, while the quantity of a commodity that a buyer decides to buy at various prices is called demand. In equilibrium. the quantity of a good supplied by producers equals the quantity demanded by consumers and the resultant price at which the demand and supply curve intersect provides the equilibrium price.