Standard SSEMI1b- Explain the role of money as a medium of
exchangeNotes- Role of MoneyWhat is money? Money is any substance
that serves as a medium of exchange, store of value, or measure of
value.It must also be accepted by everyone in a society.We use fiat
money- money issued by government decree.
Roles of MoneyRoles of MoneyMedium of Exchange: An item that can
be traded for another good or service.
Measure of Value: a common denominator that can be used to
express worth
Store of Value: allows purchasing power to be used over time
Characteristics of moneyTo be a successful medium of exchange
money must be portable, durable, divisible, and limited in
supply.
Characteristics of moneyRole of moneyMoney advances the exchange
of goods and services.People directly get what they need instead of
waiting to barter.
Consumers want products at the cheapest possible price.
Consumers decide how much of a certain good they are willing to buy
based on price.
Role of Buyers
Sellers want to make as much as possible.Producers must be
convinced that their product will make money before they produce
it.Role of Sellers
What is price? Price is the monetary value of a product as
established by supply and demandHigh prices producers produce more
buyers buy lessLow prices producers produce less buyers buy
more
How do prices help us?Prices are a link between producers and
consumersPrices allow the economy to run smoothlyThis helps us
decide how we are allocating scarce resources
Prices Help Us Prices dont favor consumer or producerThey are
flexible which helps the market accommodate changeNo one has to
worry about deciding on a price
