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1 Because of the ‘coincidence of wants ‘ problem
1 Because of the ‘coincidence of wants ‘ problem .
- Barter exchange is not possible
- Primitive traders established ‘tradng posts ‘ and relied on indirect barter .
- Governments were impelled to create money .
Buyers and sellers must want the same things for trade to take place .
2
If the market demand and supply curves are given by Qd = 250 - 4P and Qs = 50+ P, for which one of the following price levels, there is shortage in this markee! Select one: a. 50 b. 45 c. 40 d. 35 e. 55
Expert Solution
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Coincidence of wants requires that the buyers and sellers have the same set of goods that is desired by the other party. This may lead to barter in some cases, but many a times this not possible. Because of this problem, money was created by government. The correct option is c.
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At equilibrium, the quantity demanded is equal to the quantity supplied.
250 - 4P = 50 + P
200 = 5P
P = 40
Q = 50 + 40 = 90
When the price level is less than the equilibrium price, there is a shortage in the market. In this case, it is when the price is 35. The correct option is d.
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