How Money Solves the Double Coincidence of Wants | CBSE Class 10 Economics Board Question

What does this question test?

This question comes up often in CBSE's sample papers for the Class 10 board exam, in a one-mark and a five-mark form. It comes from Money and Credit, the third chapter of the Class 10 Economics book, Understanding Economic Development. The one-mark form is a multiple-choice question about what removes the barter problem; the five-mark form is a long answer that asks the student to explain it in full.

Both sizes test one idea: why exchange is hard without money, and how money, working as a medium of exchange, makes it easy.

The long version also asks for the modern forms of money in India and the reason people accept them. A student who can explain those three steps in order has the whole question.

How is the question asked, and what are its variants?

In our own words, the long version reads: Explain how money does away with the need for a double coincidence of wants, and show why the modern forms of money are accepted in India. [5 marks]

The student should also be ready to answer the same idea in shorter forms:

• A short-answer version: What is meant by a double coincidence of wants, and how does money solve the problem? [3 marks]
• A multiple-choice version: a short description of barter is given, and the student picks the pair that names what barter needs and what removes that need. The right pair is a double coincidence of wants and money. [1 mark]

What does the examiner look for?

A sound plan for five marks is five clear points, each in its own sentence or two:

1. Barter defined: goods are exchanged directly for other goods, with no money in between.
2. Double coincidence of wants defined: what one person wants to sell must be exactly what the other wants to buy, and the other way round.
3. An example that shows the difficulty, such as a shoe maker who needs wheat.
4. Money as a medium of exchange: money is the step in the middle, so each person sells for money and then buys with money.
5. Modern money in India: currency and demand deposits, and why the rupee is accepted.

The key terms the examiner expects to see are barter system, double coincidence of wants, medium of exchange, currency and demand deposits. Leaving out any of the first three weakens the answer, because the question is built around them.

What does a full-marks answer look like?

The answer below stays inside the 120-word limit that CBSE sets for five-mark answers in Social Science.

Model answer. In a barter system, goods are exchanged directly for goods. This needs a double coincidence of wants: what one person wants to sell is exactly what the other wants to buy. A shoe maker wanting wheat must find a farmer who has wheat and wants shoes. Money removes this need by acting as a medium of exchange: the shoe maker sells shoes for money, then buys wheat from any seller. Modern money in India includes currency and demand deposits. The rupee is accepted because the government authorises it: the Reserve Bank of India issues notes for the central government, and no one in India can legally refuse payment in rupees. Cheques let demand deposits settle payments without cash.

Why does this answer score?

It defines both key terms before it uses them, so the examiner sees at once that the student knows what barter and a double coincidence of wants mean. It then gives one concrete example, the shoe maker and the wheat farmer, which is the example the textbook itself uses.

The answer names the function of money in the exact words of the chapter, medium of exchange, and shows how it works: one hard swap becomes a sale and a purchase.

Finally, it covers the modern forms and the reason the rupee is accepted, which the long version asks for. Each point takes one or two sentences, so an examiner can tick five points quickly.

How should the answer change for the shorter versions?

For three marks, keep the first four points: barter, the double coincidence of wants, the shoe maker example and money as a medium of exchange. Drop the modern forms of money. CBSE limits three-mark answers to 60 words, so each point gets one sentence.

For the one-mark choice, the student should look for the option that pairs a double coincidence of wants, as the thing barter needs, with money, as the thing that removes the need. Options that pair it with credit or a loan describe borrowing, not exchange, so they do not answer the question.

Why do people accept money that has no use of its own?

This part of the chapter is also asked on its own, for example as a one-mark question on who issues currency notes, and it makes the long answer stronger. Before coins came in, Indians used grains and cattle as money. Later came metal coins of gold, silver and copper, which stayed in use well into the last century.

Modern currency is different. Paper notes and coins are not made of precious metal and are of no use in themselves. They are accepted because the government authorises them.

In India, the Reserve Bank of India issues currency notes on behalf of the central government, no other person or body may issue currency, and the law makes the rupee a means of payment that no one in India can refuse.

Demand deposits work as money too. Money in a bank account can be withdrawn when the holder asks for it, and a cheque instructs the bank to pay a set amount to the person it names. Because cheques settle payments without cash, demand deposits count as money along with currency.

Where should the student revise next?

This question opens the Money and Credit chapter, and the rest of the chapter builds on it. After this page, the student should revise the chapter note on Money and Credit, which covers how banks use deposits to give loans, cheque and electronic payments, formal and informal sources of credit, and why credit matters for development.

The five-mark long answer from this page sits well beside a second long answer from the same chapter, for example on why formal sources of credit matter. Practising both keeps the whole chapter ready for the Economics questions in the paper.

Sources

The content of this page follows these official sources:

• NCERT, Understanding Economic Development, Textbook in Economics for Class X, Chapter 3, "Money and Credit" (reprint 2026-27): barter, the double coincidence of wants, money as a medium of exchange, the history and modern forms of money, and cheques.
• CBSE, Social Science (087), Class X question paper design and general instructions for the current session: section marks and the word limits of 40, 60 and 120 words.

Common errors and misconceptions

• Misconception: A double coincidence of wants means both people want the same thing. Correct: It means each person wants exactly what the other has to offer.
• Misconception: Money removes the need to find a trading partner at all. Correct: Money still needs buyers and sellers; it only removes the need for both wants to match in one swap.
• Misconception: The rupee is accepted because it is made of, or exchanged for, gold. Correct: Modern currency has no use of its own; it is accepted because the government authorises it and the law says no one in India can legally refuse payment in rupees.
• Misconception: Only notes and coins count as money. Correct: Demand deposits, used through cheques, are also money in the modern economy.

Key takeaways

• Barter needs a double coincidence of wants, which makes exchange slow and uncertain.
• Money is a medium of exchange: it splits one hard swap into two easy steps, a sale and then a purchase.
• Modern money in India takes two forms: currency, meaning paper notes and coins, and demand deposits held in banks.
• The rupee is accepted because the government authorises it and no one in India can legally refuse it.
• A five-mark answer needs five clear points, each in its own sentence or two, and must stay inside the 120-word limit.

Test yourself

Why is a double coincidence of wants an essential feature of barter?

Goods are swapped directly, so each person must want exactly what the other offers; without that match, no exchange can take place.

Why do people accept paper notes that are of no use in themselves?

The government authorises them: the Reserve Bank of India issues notes on behalf of the central government, and the law says payment in rupees cannot be refused in India.

How do demand deposits work as money?

They can be withdrawn on demand, and a cheque against them instructs the bank to pay a named person, so payments are settled without cash.