Double Coincidence Of Wants
What is the coincidence of wants?
The coincidence of wants is essential in transactions where there is no medium of exchange, and the situation makes it possible for barter trade to occur. A coincidence of wants occurs when the supplier of item A meets with the supplier of item B with both willing to carry out the exchange in order to acquire the item they do not have. In this case, the supplier with item A acquires item B and supplier of item B acquires item A. However, such kinds of transactions are rare, giving rise to the need for a medium of exchange (money). Money makes trade convenient because one does not have to rely on the coincidence of meeting a person ready and willing to make the exchange at the same time and place they need the good. For instance, a coincidence of wants would occur when a fisherman wants a packet of rice, and the shopkeeper needs fish and is willing to accept fish in exchange.
Coincidence of wants is the reason that money is so important in an economic system. Or rather, I should say money is important because it is rare to have a coincidence of wants.
Coincidence of wants occurs when two people have goods or services that they want to trade with one another. I have an answer you want, maybe you have a bunch of grapes that I want -- coincidence of needs.
But that makes it hard for an economy to run. What if I have an answer and you have nothing I want? Or what if you want to buy rice from someone and you have nothing they want? Then you have to find out what they want and go try to trade for it.
So, it is hard to get coincidence of wants for all the things we want to have.
But when money is invented, we no longer need coincidence of wants. We can trade money for anything.
Coincidence of wants, also called double coincidence of wants, occurs when each of two persons, who are in a position to exchange good and services with each other, have exactly the same products available for exchange that the other person want. This makes very simple for both of them increase their satisfaction by exchanging surplus of what they have for something they want and don't have. However this kind of double coincidence of want is quite rare. Thus in most of the situation we are likely have "want of coincidence" rather than "coincidence of wants".