How does money serves as a Medium of Exchange?

Medium of exchange is the most important function of money. As mentioned earlier, in the barter system, exchanges were made directly. This required a double coincidence of wants which made the system very inefficient. This included transaction cost of two types – i) search cost, that is, the opportunity cost involved in searching for the right person. ii) Disutility of waiting, which is, waiting for the right person, is a discomfort which leads to disutility.
But, in the monetary economy, since money is widely accepted as a medium of exchange, anyone can sell any commodity at any time and can use the money at the same time or even later to buy goods and services. This separates the act of sale and purchase which is very important for large scale production. Money by acting as medium of exchange eliminates the problem of double coincidence of wants and also removes the transaction cost involved in the barter system of exchange.