what is money and also explain the drawbacks of barter system?
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money is something that actors in as an intermediate in the transaction processes barter system is a system where the money or something some currency is not used and B goode sir or exchanged with the goods like good so if you want to borrow something you have to give something like things are taken and things are given so I am going to explain you the disadvantage of the barter system with the help of an example so let's consider that there are three salesman number one is a shoe seller number 2 is a milkman the suppose that the milkman wants to buy grains ok and also suppose that the shoe seller wants to buy milk OK so the shoe seller visit to the milkman and ask him that I want milk and then milkman say to him I want grains only then I will give you the milk but the shoe seller does not have grains as he only have shoes so there the conflict arises so this is the disadvantage of the barter system that if the people doesn't have any intermediate currency they cannot be able to sometimes they cannot be able to take the things they want
raminder1:
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Money is primarily a medium of exchange or means of exchange. It is a way for a person to trade what he has for what he wants.
Ideal money has three critical characteristics:
it acts as a medium of exchange;
it is an economic good;
and it is a means of economic calculation.
Before evolution of money, goods were exchanged for goods, this system of exchange was known as barter system.
The major drawbacks of the barter system were:
(i) Lack of double coincidence of wants It was a major drawback of the barter system. It was very rare when the owner of some goods or services could find someone who wanted his goods or services and possessed that goods or services that the first person wanted. No exchange was possible, if the double coincidence of wants was not there.
(ii) Lack of common measure of value In barter system, there was absence of a common unit of measurement in which the value of goods and services can be measured. In the absence of common unit, proper valuation was not possible.
(iii) Lack of standard for deferred payments Deferred payment means future payments. 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.
(iv) Lack of store of value Due to absence of money in barter system, wealth was stored in terms of goods. Storing of goods carried some problems like cost of storage, loss of value, transfer from one place to other, etc. So, in case of commodities, it was difficult for people to store their purchasing power.
(v) Lack of divisibility In commodity exchange, difficulty of dividing the commodity has been arised. e.g. if car is to be exchanged for a scooter, then car cannot be divided. Similarly, animals cannot be divided into smaller units.
hope it will helpful for m.j...n
Ideal money has three critical characteristics:
it acts as a medium of exchange;
it is an economic good;
and it is a means of economic calculation.
Before evolution of money, goods were exchanged for goods, this system of exchange was known as barter system.
The major drawbacks of the barter system were:
(i) Lack of double coincidence of wants It was a major drawback of the barter system. It was very rare when the owner of some goods or services could find someone who wanted his goods or services and possessed that goods or services that the first person wanted. No exchange was possible, if the double coincidence of wants was not there.
(ii) Lack of common measure of value In barter system, there was absence of a common unit of measurement in which the value of goods and services can be measured. In the absence of common unit, proper valuation was not possible.
(iii) Lack of standard for deferred payments Deferred payment means future payments. 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.
(iv) Lack of store of value Due to absence of money in barter system, wealth was stored in terms of goods. Storing of goods carried some problems like cost of storage, loss of value, transfer from one place to other, etc. So, in case of commodities, it was difficult for people to store their purchasing power.
(v) Lack of divisibility In commodity exchange, difficulty of dividing the commodity has been arised. e.g. if car is to be exchanged for a scooter, then car cannot be divided. Similarly, animals cannot be divided into smaller units.
hope it will helpful for m.j...n
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