Distributive Justice Class notes for detailed info.
- Medium of Exchange. Solves the problem of the double coincidence of wants
- See Money (Medium of Exchange)
- Observe the Edgeworth Box This is a full barter system based on Indifference Curves. This is impossible, so we need a convenient medium of exchange
- Store of Value. Functions as a claim on future consumption
- I give you the perishable food now ⇒ you give me a claim on future consumption.
- Time Value of Money arises ← due to risk aversion and instant gratification (human psychology)
- Financial Markets use this to convert the storage of value into something actually useful and not just gold sitting in a vault
- I give you the perishable food now ⇒ you give me a claim on future consumption.
- Unit of Account. Helps quantify the value of things
- Problematic because Use value, Exchange value distinction
- Also problematic because the Price Mechanism doesn’t give the pure value of things
- …but is still useful because you do need to write things down in Balance Sheets.