Question

Why is money transaction system is better than barter system?

Answer 1

(i) Transaction system is better than barter system because double coincidence of wants creates problem.

(ii) For example, shoe manufacturer wants to sell shoes in the market and wants to buy wheat. For this, he would look for a wheat growing farmer who would exchange his wheat with the shoes.  

(iii) In barter system, goods are exchanged without the use of money.  

(iv) In contrast, in an economy where money is in use; money by providing the crucial intermediate step eliminates the need for double coincidence of wants.