Question

What is the double-coincidence of wants?

Short answer

The double coincidence of wants refers to a situation where two individuals each possess a good or service desired by the other, enabling them to engage in a mutually beneficial exchange without using money or currency. It is crucial in bartering systems, where goods and services are exchanged directly without monetary intermediaries. For example, if Person A has apples and desires bread, and Person B has bread and desires apples, they can directly exchange their goods, satisfying the double coincidence of wants.

Step-by-step solution

Definition

The double coincidence of wants is an economic term referring to a situation where two individuals each have a good or service that the other wants, making it possible for them to engage in a mutually beneficial exchange without the need for money or currency. It is a key concept in bartering systems, where goods and services are exchanged directly without the use of money as a medium of exchange.

Example

For instance, let's imagine two people - Person A and Person B. Person A has a bag of apples, and Person B has a loaf of bread. If Person A desires bread and Person B desires apples, they can directly exchange their goods with each other without the need for any intermediary currency. This satisfies the double coincidence of wants, as both parties have what the other party wants. If this were not the case, they would have to involve other parties or use a currency to facilitate the exchange.