How does the existence of money simplify the process of buying and selling?

Before the existence of money, people used the barter system for buying and selling. Under barter system, people exchanged goods and services directly with one another, without any medium of exchange like money. For example, a farmer who grows vegetables might exchange a basket of tomatoes with a fisherman who caught fish. However, this system had several disadvantages and inefficiencies.

The barter system had many problems, including the lack of a common measure of value, the need for a mutual coincidence of wants, the difficulty of storing wealth, and the issue of indivisibility of goods. For example, in the barter system, if a person who makes pots needed a cow, it would be challenging for him to find someone who has a cow and also needs pots. Moreover, the pots must have the same value as that cow to make a fair exchange. This condition often led to complicated transactions and negotiations.

Money was introduced as a solution to the problems faced in the barter system. Money acts as a medium of exchange, a unit of account, and a store of value. Money can be in the form of currency, coins, or even digital money in today's world.

With the introduction of money, the process of buying and selling became significantly easier and more efficient due to the following reasons: 1. Common Measure of Value: Money provides a standard unit to measure the value of various goods and services. This simplifies the process of determining prices and making decisions on purchases and sales. 2. Elimination of the Double Coincidence of Wants: Money eliminates the need for a double coincidence of wants, as a person who has money can buy anything they want, provided that the seller accepts it as a mode of payment. This helps in streamlining transactions and finding trading partners. 3. Ease in Storing Wealth: Money enables people to store their wealth easily, in the form of currency, bank deposits, or investments. In the barter system, storing wealth was a challenge because different commodities had various storage requirements, and some goods had a limited shelf-life. 4. Divisibility: Money can be easily divided into smaller units, such as cents or pence. This allows for greater flexibility in exchanging goods and services. In contrary, some goods might be hard to divide (like livestock). By eliminating the problems of the barter system, money greatly simplifies the process of buying and selling, making transactions more efficient and accessible to everyone.