1. What is a barter system? What are its drawbacks?
7 views
0 votes
0 votes
1. What is a barter system? What are its drawbacks?
User Avatar
by
12.8k points

1 Answer

0 votes
0 votes
 
Best Answer

In ancient times, the barter system was used to exchange things. It was a method of exchanging one commodity, product, or set of goods for another. For example, if a person has 1 kg of sugar and wants 1 kg of jaggery in trade, he can do so if someone else is prepared to exchange sugar for jaggery. A commodity for commodity exchange was the name given to this activity. It was also supplanted by the monetary system.

The following are some of the disadvantages of the barter system:

1. Double Coincidence of Wants: It is one of the assumptions that led to the downfall of the barter system. The double coincidence of wants indicates that two individuals will only exchange commodities and services if they both require the goods of the other.

2. Indivisibility of Goods: This refers to another significant disadvantage of the barter system. In the event of items that lose their utility when divided into components, the barter system of exchange was not applicable.

3. Common Measure of Value: One of the most significant causes for the barter system's collapse. Because there is no universal measure of worth in the barter system, determining a set ratio for exchanging commodities and services is problematic. 

4. Store of Value: Refers to one of the reasons for the barter system's collapse. In the barter system, value is stored in the form of commodities including cereal grains and livestock. 

User Avatar
by
12.8k points

Related questions

1 answer
0 votes
0 votes
9 views
S. Ruby Asked Mar 6, 2023
6 views
S. Ruby Asked Mar 6, 2023
by S. Ruby
7.8k points
1 answer
0 votes
0 votes
6 views
Ankit kumar Asked Feb 26, 2023
7 views
Ankit kumar Asked Feb 26, 2023
by Ankit kumar
9.8k points
1 answer
0 votes
0 votes
7 views
1 answer
0 votes
0 votes
5 views
1 answer
0 votes
0 votes
5 views
WELCOME TO ANSWER AVENUE, WHERE YOU CAN ASK QUESTIONS AND RECEIVE ANSWERS FROM OTHER MEMBERS OF THE COMMUNITY.

Categories