Why do we need money?

Money has three functions:

a) Money is used as trade or monetary unit: In a pure trade society farmer Fred will trade shoemaker Paul 20 eggs for a pair of shoes. This functions if Paul needs the eggs. However, if he needs vegetables then it gets a little complicated. It would be easier if Fred had money to give Paul. Paul could then buy what he needs. Money is therefore a comparative object, a tertium comparationis ("a third comparative unit").

b) Money as a value storage unit: Money represents a certain value that one can trade at any time into wares or services.

c) Money functions as calculation unit: A characteristic of the monetary economy is that the market value of a ware is measured by a standard value. This simplifies the comparison of the value of two products or services.