Question

Mentation three limitation of the barter system

Answer 1

Lack of double coincidence of wants:

Double coincidence of wants means what one person wants to sell and buy must coincide with what some other person wants to buy and sell. ‘Simultaneous fulfillment of mutual wants by buyers and sellers’ is known as double coincidence of wants.

There is lack of double coincidence in the wants of buyers and sellers in barter exchange. The producer of jute may want shoes in exchange for his jute. But he may find it difficult to get a shoe-maker who is also willing to exchange his shoes for Jute.

Thus, a seller has to find out a person who wants to buy seller’s good and at the same time who must have what the seller wants. This is called double coincidence of wants which is the main drawback of the barter exchange.

Lack of common measure of value:


In barter, there is no common measure (unit) of value. Even if buyer and seller of each other commodity happen to meet, the problem arises in what proportion the two goods are to be exchanged. Each article must have as many different values as there are other articles for which it is to be exchanged.

When thousands of articles are produced and exchanged, there will be unlimited number of exchange ratios. Absence of a common denominator in order to express exchange ratios creates many difficulties. Money obviates these difficulties and acts as a convenient unit of value and account.

Difficulty in storing wealth (or generalised purchasing power):

It is difficult for the people to store wealth or generalised purchasing power for future use in the form of goods like cattle, wheat, potatoes, etc. Holding of stocks of such goods involves costly storage and deterioration.

Answer 2

1)Money has eliminated the problem of double coincidence of wants

2)money acts as a medium of exchange

3)it is easily acceptable.

This is for 3 marks