Wednesday, December 22, 2010

The Lack of Coincidence of Wants

I am in the middle of grading Money and Banking Finals. The best answer so far is from a student answering a question asking him to identify the problems of barter and how the development of money solves these problems.

The student begins explaining the problem of the lack of coincidence of wants. If both potential parties to an exchange do not value the good they would receive in exchange more highly than what they trade away, an exchange will not take place. Therefore, in a barter economy, it is difficult to facilitate many transactions. "For example," the student says, "If I'd want to hear an economics lecture, but all I had was a Britney Spears CD, I would not be able to make a trade with Dr. Ritenour."

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