why is money transaction system better than barter system ? explain with example
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Money vs. Barter
In the next main topic of this course, macroeconomics, money is one of the important concepts. This section talks about money from the perspective of microeconomics.
When people exchange goods and services without using money, this is called barter. "I'll cook dinner if you'll do the dishes" is an example of barter.
Imagine an economy in which I can sell services as a consultant to banks, but what I want is to buy a new suit. The clothing store that sells suits does not have any use for my services as a banking consultant. The bank does not sell suits. How can barter work?
One can imagine a computer system that finds a bank that wants my consulting services, a clothing store that needs banking services, and then arranges a three-way trade where I get my suit in exchange for consulting services. As the economy gets more complex, the computer system has to arrange barter trades that are more and more elaborate.
Instead of a computerized bartering system, we use money to implement complex exchanges. I sell consulting services for money, and I buy a suit using money.
In the next main topic of this course, macroeconomics, money is one of the important concepts. This section talks about money from the perspective of microeconomics.
When people exchange goods and services without using money, this is called barter. "I'll cook dinner if you'll do the dishes" is an example of barter.
Imagine an economy in which I can sell services as a consultant to banks, but what I want is to buy a new suit. The clothing store that sells suits does not have any use for my services as a banking consultant. The bank does not sell suits. How can barter work?
One can imagine a computer system that finds a bank that wants my consulting services, a clothing store that needs banking services, and then arranges a three-way trade where I get my suit in exchange for consulting services. As the economy gets more complex, the computer system has to arrange barter trades that are more and more elaborate.
Instead of a computerized bartering system, we use money to implement complex exchanges. I sell consulting services for money, and I buy a suit using money.
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