Question

Explan four demerits and merites of the barter system

Answer 1

Answer:

Barter system refers to an act of trading goods and services between two or more than two parties without involving the use of money.  

Some of the advantages of Barter system are as follows;  

• It is a simple system free from the complex problems of the modern monetary system.  
• The complexity of international trade, like foreign exchange crisis and adverse balance of payments, do not exist in the barter system.  
• Personal and natural resources are utilized to meet the needs of the society without involving any wastage.

 

Apart from the above mentioned advantages, there are also certain disadvantages to the system. They are:  

• Absence of common measure value  : Money acts as a role of a measure of value of all goods in a monetary economy thus helping in measuring their values against each other. This remains to be absent in a barter economy.  
• Invisibility of certain goods:   A barter transaction cannot takes place if an individual wants to buy a certain amount of goods but only has single invisible unit of another good which is worth more than what the individual wants to obtain.

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