Economics · Level 2 · 163 words
Why We Use Money
Original passage © Studio AM, written for Fluency.
Before money, people traded goods for goods. This is called barter. A farmer with eggs could trade them for shoes. But barter has a problem. The farmer must want shoes, and the shoemaker must want eggs at the same time. If the shoemaker wants bread instead, no trade happens.
Money solves this problem. Money is a thing that everyone agrees to accept. The farmer sells eggs for coins. Later he uses the coins to buy shoes. He does not need to find one person who wants exactly what he has.
Money also stores value. Eggs go bad in a week, so a farmer cannot save them. Coins do not go bad. He can hold them for a year and still buy something with them.
Money is also a way to measure. When every price is written in the same unit, people can compare a shirt and a chair in a second. Barter has no simple unit, so every trade needs a new negotiation.
Source: Written for Fluency. Original passage © Studio AM, written for Fluency.