Ramu is a shoe manufacturer and he wants to directly exchange shoes for rice without the use of money. Now he will have to look for a rice-growing farmer who not only wants to sell rice but also wants to buy the shoes in exchange. Which among the following describes the situation?

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Double coincidence of wants

Goods exchange with goods

Goods exchange with money

None of the above

answer is A.

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Detailed Solution

Ramu's situation represents a double coincidence of wants. Double coincidence is when a person who wishes to sell and buy a commodity gets his need satisfied by another person whose need gets satisfied by the other. Before the introduction of money as a medium of exchange, double coincidence of wants was a must for any transaction. Here, Ramu has to sell shoes and buy rice which should be met by a farmer who is ready to buy shoes and sell rice. Hence, we can conclude that this is a situation of double coincidence of wants.

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