Barter to Money: How Double-Coincidence of Wants Evolved Trade

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The double-coincidence of wants is an economic concept that refers to a situation where two parties have goods or services that each desires. Both parties' desires align so that they can engage in a direct exchange without the need for a medium of exchange, such as money. It is a prerequisite for a barter system to function smoothly.

In a barter system, individuals or parties directly exchange goods or services without involving money. However, for a successful barter to occur, there must be a mutual desire for each other's goods or services. This is where the double coincidence of wants becomes crucial. It means that both parties simultaneously desire what the other has to offer.

For example, suppose Person A has wheat and wants to acquire cloth, while Person B has cloth and wants to acquire wheat. In this case, a double coincidence of wants exists because both parties have what the other desires. They can then engage in a direct exchange, swapping wheat for cloth, without requiring a medium of exchange.