Question

what is barter system and what is the major drawbacks of barter sysyem​

Answer 1

‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ Barter System

A barter system is an old method of exchange. Th is system has been used for centuries and long before money was invented. People exchanged services and goods for other services and goods in return.Goods were exchanged for goods prior to invention of money. Barter system worked on certain conditions mentioned below :

• Each party to barter must have surplus stocks for the trade to take place.
• Both the buyers and sellers shouldrequire the goods each other desperatelyi.e., double coincidence of wants
• Buyer and seller should meet personally to effect the exchange.

Constraints In Barter System :

• Constraints in Barter System The barter system envisages mutual exchange of one’s goods to other without the intervention of money as a medium of exchange.
• It imposes certain constraints in the smooth flow of trade as explained below.

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Drawbacks In Barter System :

1. Lack of double coincidence of Wants
2. Non – existence of common measure of value
3. Lack of direct contact between
4. Lack of surplus stock

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1. Lack of double coincidence of Wants :

• Unless two persons who have surplus have the demand for the goods possessed by each other, barter could not materialize.
• For ‘A’ is having a surplus of groundnut and ‘B’ is possessing rice in surplus. In this case A should be in need of rice possessed by B as the latter should desperately need groundnut possessed by A. If this “coincidence of wants” does not exist, Barter cannot take place.

2. Non – existence of common measure of value :

• Barter system could not determine the value of commodities to be exchanged as they lacked commonly acceptable measures to evaluate each and every commodity. It was difficult to compare the values of all articles in the absence of an acceptable medium of exchange.

3. Lack of direct contact between :

• producer and consumers It was not possible for buyers and sellers to meet face to face in many contexts for exchanging the commodities for commodities. This hindered the process of barter in all practical sense.

4. Lack of surplus stock :

• Absence of surplus stock was one of the impediments in barter system. If the buyers and sellers do not have surplus then no barter was possible.

Answer 2

Answer:

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Explanation:

◆The major drawbacks of the barter system were: (i) Lack of double coincidence of wants It was a major drawback of the barter system. ... In barter system, it was difficult to return value in future in terms of goods of same quantity and quality. Therefore, future , payments regarding interest and loans became difficult.

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