What are the different ways in which money would make the above situation easier for the farmer?
Money would solve all the farmer's problems:
(1) No need for double coincidence of wants—the farmer can sell the ox to anyone who wants it and receive money, then use money to buy from anyone who has shoes, sweaters, or medicines.
(2) Common standard measure of value—prices in money terms allow easy comparison of goods.
(3) Divisibility—money can be divided into smaller units to make exact payments.
(4) Portability—money is easy to carry compared to an ox or bags of wheat.
(5) Durability—money can be stored for long periods without spoiling.
(6) Store of value—money received from selling the ox can be saved and used later for purchases.
(7) Single transaction—the farmer can make multiple purchases without multiple complex exchanges.
Explanation
The chapter explains on Pages 8-9 that money serves as a 'medium of exchange,' 'store of value,' and 'common denomination.' It states: 'If the farmer uses money instead of wheat as a medium of exchange, he can keep the money for a longer time and use it for making purchases later.' Money eliminates all the problems of barter that the farmer faced.
Solution Steps
Money eliminates the need for double coincidence of wants
Money serves as a common standard measure of value for easy comparison
Money offers divisibility for making exact payments
Money provides portability unlike physical goods
Money has durability for long-term storage
Money acts as a store of value for future purchases
Money enables single transactions instead of complex exchanges