a. Define money. Explain how money can _____.
i. Overcome the difficulties of double coincidence of wants
ii. Act as a store of value
iii. Help producers employ various factors of production.
i. Overcome the difficulties of double coincidence of wants
ii. Act as a store of value
iii. Help producers employ various factors of production.
a. (i) Money resolves the problem of double coincidence of wants by acting as the Medium of Exchange. Since money has general acceptability and purchasing power, it is used for purchasing various goods and services. Since nobody refuses to accept money in exchange for goods and services, there is no need for double coincidence of wants which was a major problem under the better system.
(ii) As a store of value: Wealth is usually kept in the form of money because money is the most liquid form of wealth. Since savings is usually done with a view to use the savings for purchasing some commodities or services. It is often said that 'Money is a matter of functions four: A medium, a measures, a standard, and a store'.
(iii) Every producer aims to maximise his/her profit while employing various factors of production. A profit-maximising entrepreneur will equate marginal productivity expressed in value terms of a factor with the remuneration such as wage rate, rate of interest, etc, Since rates of remuneration are expressed in money terms, it is money which helps the producer in arriving at decisions with regard to the units of a factor of production to be employed by him.
a. (i) Money resolves the problem of double coincidence of wants by acting as the Medium of Exchange. Since money has general acceptability and purchasing power, it is used for purchasing various goods and services. Since nobody refuses to accept money in exchange for goods and services, there is no need for double coincidence of wants which was a major problem under the better system.
(ii) As a store of value: Wealth is usually kept in the form of money because money is the most liquid form of wealth. Since savings is usually done with a view to use the savings for purchasing some commodities or services. It is often said that 'Money is a matter of functions four: A medium, a measures, a standard, and a store'.
(iii) Every producer aims to maximise his/her profit while employing various factors of production. A profit-maximising entrepreneur will equate marginal productivity expressed in value terms of a factor with the remuneration such as wage rate, rate of interest, etc, Since rates of remuneration are expressed in money terms, it is money which helps the producer in arriving at decisions with regard to the units of a factor of production to be employed by him.
