Goods were exchanged for goods prior to invention of money. Each party

1.	Goods were exchanged for goods prior to invention of money. Each party must have surplus goods for exchange. What does it mean? What are the constraints of that system?
Answer» The system in which the goods were exchanged for goods was called ‘barter system’. The barter system has many constraints. They are: 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. 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. 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. 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.

Goods were exchanged for goods prior to invention of money. Each party must have surplus goods for exchange. What does it mean? What are the constraints of that system?

Answer»

The system in which the goods were exchanged for goods was called ‘barter system’. The barter system has many constraints.

They are:

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. 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.

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.

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.

Goods were exchanged for goods prior to invention of money. Each party must have surplus goods for exchange. What does it mean? What are the constraints of that system?

Discussion

No Comment Found

Related InterviewSolutions

Reply to Comment