Question

explain the constraints in barter system....

Answer 1

The five main difficulties found in barter system are as follows: 1. Double Coincidence of Wants 2. Lack of a Standard Unit of Account 3. Impossibility of Subdivision of Goods 4. Lack of Information 5. Production of Large and Very Costly Goods not Feasible.

Money was not used in the early history of man. Exchanges were few since each family was self- sufficient. Whatever exchanges there were, they took the form of barter, that is, exchange of goods for the other goods. Various difficulties were faced by the people in the barter economy.

There was no acceptable means of payment for the direct purchase of goods and services in the barter economy. In other words, in a purely barter system, there was no generally acceptable medium of exchange in the form of a particular good or asset which could be used to buy goods and services and do other types of transactions.