Money As A Medium of Exchange

Money As A Medium of Exchange

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Storyboard Description

Money acts as an intermediate in the exchange process therefore it is called a medium of exchange.

Storyboard Text

  • Yes Lakshay. I will explain you about it while walking. Let's go.
  • Mom is there anything else that can replace money to buy goods and services?
  • In the ancient time barter system was used to exchange goods and services but it had many disadvantages because of which money was introduced in the society.
  • Beta in the barter system goods are directly exhanged without the use of money.
  • Mom what is this barter system?
  • Money by acting as an intermediate in the exchange process eliminates the need for double coincidence of wants and thus it is called a medium of exhange. Therefore Beta it is better that we use only money to buy goods and services. 
  • In barter system both parties have to agree to sell and buy each others commodities.
  • Hi Sunita.  Can you give me bananas? In exchange I will give you these apples.
  • Hi Aarti. I am sorry I cannot because I don't want apples.
  • This is called double coincidence of wants i.e, what a person desires to sell is exactly what the other wishes to buy. 
  • Okay mom.
  • It is so time consuming to search for someone who is willing to exchange these apples with bananas.
  • It is better to find a buyer for apples and exhange these apples for money .I can then purchase bananas or other commodity with that money in the market.
  • Yes Mom
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