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The artisan doesn’t want the wheat in exchange for his furniture, so therefore they cant barter with wheat. The artisan also isn’t confident that he can exchange the wheat in turn for the goods he wants In the future, so the parties cant use wheat as the medium of exchange. The artisan would however be willing to exchange his furniture for a certain quantity of copper – a commodity which he both has immediate need for AND is confident we will be able to use as a medium of exchange for goods he will need in the future.

The farmer is also able to exchange his wheat for copper, as there is a miner who wants to exchange his copper directly for wheat, and the farmer is confident he will be able to use the copper as a medium of exchange for goods he will need in the future, in this case, the artisans furniture. Thus, the medium of exchange is born, and copper acts as the ‘Money’ which the farmer uses to ‘buy’ the artisans furniture.

We see displayed here one key characteristic of the means of exchange, and that is that is that it is able to act as a ‘store of value’. For a good to act as a ‘store of value’ it means that it can essentially retain ‘purchasing power’, meaning people can be confident that the same quantity of the medium of exchange can reliably be exchanged for the same quantity of other goods throughout the economy. We can now use exchange ratios(prices), to tell us how what quantity of a certain good we can get in exchange for a certain quantity of money. For prices to be stable, and ultimately then for economies to be stable, then it is essential that money to be the best store of value possible. The free market will determine which commodity best serves as a means of exchange, as it is in everyone’s interest to exchange and store their value as effectively as possible.