Q1.
What are the different ways in which money would make the above situation easier for the farmer?
Answer
Money would replace the farmer's whole chain of swaps with one sale and three purchases.
With barter: ox → wheat → shoes, and → sweater, and → medicines (4 exchanges, 3 journeys with sacks)
With money: ox → ₹ → shoes, sweater, medicines (1 sale, then simple buying)
With money: ox → ₹ → shoes, sweater, medicines (1 sale, then simple buying)
It helps in five distinct ways, one for each weakness of barter:
| Function of money | What it does for the farmer |
|---|---|
| Medium of exchange | He sells the ox to anyone who wants it and buys from anyone who sells shoes — no double coincidence of wants needed |
| Common measure of value | Shoes, sweater and medicines all carry a price in rupees, so he can compare them and no bargaining battle is needed |
| Divisibility | The ox becomes a sum of money that can be split exactly — some for shoes, some for the sweater, the rest for medicines |
| Portability | Notes and coins go in his pocket; no sacks to haul from village to village |
| Store of value | Whatever is left over keeps its value. It will not rot and rats will not eat it, so he can spend it months later |
Money also lets him buy today and settle later, because it is accepted as a standard of deferred payment.