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DOUBLE COINCIDENCE OF WANTS: The requirements of a barter exchange that each trader has want the other wants and wants what the other has. Because everyone doesn't necessarily want everything, the lack of double coincidence of wants is a major obstacle in barter exchanges, especially for complex, modern economies. While double coincidence of wants is also essential for exchanges involving money, it's such an inherent trait of money we don't think twice about it. By its very nature as a generally accepted medium of exchange, everyone WANTS money.
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                           IN-KIND PAYMENTS: A payment, usually in exchange for the productive efforts of resources, that takes the form of goods and services produced by the resource buyer rather than the economy's standard monetary unit (that is, dollars). In other words, resource owners are compensated with a portion of the output that they help to produce. The standard method of compensation, which is illustrated by the circular flow model, is for a firm to pay resource owners using money revenue received from selling its production. Hence most factor payments are monetary payments. However, in some circumstances firms and resource owners find it more convenient to use actual production for compensation, eliminating the sell-production-for-money step. In-kind payments are noteworthy when the topic turns to measuring gross domestic product. The number crunchers responsible for measuring gross domestic product at the Bureau of Economic Analysis make a special effort to include ALL production--the vast majority sold in markets, as well as the smaller portion used to compensate resource owners as in-kind payments.In Lieu of MoneyIn-kind payments are common in a wide assortment of industries. Farming and agricultural production are perhaps the most notable. Farmers often find it easy to pay their workers with crops produced. Come harvest time, the farmhands might receive a portion of the bounty. Service industries are also prone to in-kind payments. A dentist, for example, might provide employees with dental care. An accountant might prepare income tax returns for employees. Retail stores also use in-kind payments in lieu of higher monetary wages. Restaurants often provide meals to their employees. Clothing stores let employees purchase goods at reduced prices.Edgar Loves TacosTo illustrate how in-kind payment is used as compensation for productive activity, consider the circumstance of Edgar Millbottom, a dedicated employee of Waldo's TexMex Taco World. The primary output of Waldo's TexMex Taco World is, of course, the highly popular Super Deluxe TexMex Gargantuan Taco (with sour cream and jalapenos). The standard operating procedure for Waldo's TexMex Taco World is to sell Super Deluxe TexMex Gargantuan Tacos to taco-hungry customers, then use the revenue collected from taco sales (about $2 each) to compensate owners of the resources used to fabricate Gargantuan Tacos, including the star of this story, Edgar Millbottom.However, Edgar is not only an employee, he is also a Gargantuan Taco lover. Even before his employment at Waldo's TexMex Taco World, Edgar was known to consume large numbers of Gargantuan Tacos morning, noon, and night for months on end. As such, when Edgar was hired by Waldo's TexMex Taco World he agreed to less monetary compensation (that is, a lower hourly wage) with the difference made up in Gargantuan Tacos. Edgar is happy. And Waldo's TexMex Taco World is indifferent. They do not care if they sell tacos, collect revenue, then pay Edgar a monetary wage, or directly use the tacos to pay Edgar. The bottom line for them is the same in either case.
Recommended Citation:IN-KIND PAYMENTS, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2024. [Accessed: May 11, 2024].
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Today, you are likely to spend a great deal of time wandering around the shopping mall hoping to buy either a rechargeable battery for your computer or shoe laces for your snow boots. Be on the lookout for bottles of barbeque sauce that act TOO innocent.
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The 1909 Lincoln penny was the first U.S. coin with the likeness of a U.S. President.
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