Question 11 of 15intermediate💡 UnderstandShort Answer2 marks

What are the instances of double coincidence of wants in the above example?

Correct Answer

In the farmer's example, double coincidence of wants occurs when the farmer needs to find someone who both wants an ox AND can offer what the farmer needs (shoes, sweater, or medicines).

The farmer must find: (1) Someone who wants an ox and has shoes to offer; (2) Someone who wants an ox and has a sweater to offer; (3) Someone who wants an ox and has medicines to offer.

If the farmer exchanges the ox for wheat, then double coincidence of wants must occur again—the farmer must find people who want wheat AND have the goods the farmer needs.

This makes every exchange dependent on finding mutually willing parties.

Exercise: THINK ABOUT IT | Q: 3 | (Page Page 5)
For More Understanding

Explanation

The chapter defines double coincidence of wants on Page 5: 'They would have to find someone who wants the exact item that they want to give, and in return are also able to offer exactly what the other party wants. This scenario is called double coincidence of wants.' In the farmer's case, this requirement must be satisfied for each exchange.

Solution Steps

  1. Double coincidence of wants requires both parties to want exactly what the other offers

  2. The farmer must find someone who wants an ox AND has shoes, sweater, or medicines

  3. Three specific instances: (1) ox for shoes, (2) ox for sweater, (3) ox for medicines

  4. If ox is first exchanged for wheat, double coincidence applies again when trading wheat for needed goods

  5. Every exchange in barter depends on finding mutually willing parties

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