What is the Barter system? writr three disadvantages of the Barter system
Answers
Answer:
The functioning of the barter system requires a double coincidence of wants on the part of those who want to exchange goods or services. It is necessary for a person who wishes to trade his good or service to find some other person who is not only willing to buy his good or service, but also possesses that good which the former wants. For example, suppose a person possesses a horse and wants to exchange it for a cow. In the barter system he has to find out a person who not only possesses a cow but also wants a horse.
The existence of such a double coincidence of wants is a remote probability. For, it is a very laborious and time-consuming process to find out person who want each other’s goods. Often the horse-owner would have to carry through a number of intermediary transactions.
He might have to trade his horse for some sheep, sheep for some goats and goats for the cow he wants. To be successful, the barter system involves multilateral transactions which are not possible practically. Consequently, if the double coincidence of wants is not matched exactly, no trade is possible under barter. Thus a barter system is time-consuming and is a great hindrance to the development and expansion of trade.
Explanation:
A barter system is an old method of exchange. Th is system has been used for centuries and long before money was invented.
The problems of international trade, like foreign exchange crisis and adverse balance of payments, do not exist in the barter system. Personal and natural resources are perfectly utilized to meet the requirements of the society without involving any wastage.