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