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A double coincidence of wants is a socioeconomic problem that depicts a situation where individuals that have something they want to trade must also coincide in wanting each other’s goods at the same time, in order for a transaction to be successful. In order to overcome this issue, money was invented as a medium of exchange.

Explanation:

Barter was one of the earliest systems of exchange in human history. It was a simple system that allowed individuals to satisfy each other’s wants by providing something one had, to another, in exchange for goods they did not own. However, the system was incredibly limited. While it worked for the earliest hunter-gatherer societies, where commodities were few and mostly consumable, it was unable to satisfy the continuous evolution of crafts.

A farmer, for example, might have an excess of fruit they would want to exchange for a farming tool, which a smith would have. However, if a smith does not want or like the fruits provided to him, then the deal is off, and the farmer’s excess would become spoiled with time. Matching the double coincidence of wants in a barter system is, thus, increasingly hard and cumbersome.

The concept of money was created to solve this problem. Instead of matching everyone’s wants and needs, it was used as a medium of exchange, allowing the farmer to sell their fruit to someone who wants it, and then buying the tools from the blacksmith.

The latter, on the other hand, is enabled to spend that money on whatever they require the most, thus allowing flexibility for all parties. For that reason, the invention of monetary systems was considered an important stepping stone to the evolution of the society and the division of labor.