Mention three limitation of the barter system
Answers
Answer:
1.lack of double coincidence of wants
2. lack of common measure value .
3.lack of payment of deferred payment.
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Explanation:
. Lack of Double Coincidence of Wants:
Barter system can work only when both buyer and seller are ready to exchange each other’s goods. For example, A can exchange goods with B only when A has what B wants and B has what A wants. However, such double coincidence is very rare.
2. Lack of Common Measure of Value:
In the barter system, all commodities are not of equal value and there is no common measure (unit) of value of goods and services, in which exchange ratios can be expressed
3. . Lack of Standard of Deferred Payment:
Under barter system, contracts involving future payments or credit transactions cannot take place with ease because of following reasons:
(a) The borrower may not be able to arrange goods of exactly same quality at the time of repayment.
(b) There may be conflicts regarding which specific commodity is to be used for repayment.
(c) The commodity to be repaid may lose or gain its value at the time of repayment.
So, it is very difficult to make deferred payments in the form of goods.
4. Lack of Store of Value:
Under barter system, it is difficult for people to store wealth for future use because:
(a) Most of the goods (like wheat, rice, vegetables, etc.) do not possess durability, i.e. their quality deteriorates with passage of time.
(b) Storage of goods requires time and efforts.
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