BARTER SYSTEM & ITS DISADVANTAGES : Flashcards
What is the barter system?
The barter system is a method of exchange where goods and services are directly traded without using money.
What is meant by “double coincidence of wants” and how does it create a challenge in a barter system?
Double coincidence of wants means that in order for a trade to happen, both parties must want what the other has to offer. This can be time-consuming and difficult to achieve, limiting trade opportunities.
Explain how storage issues create disadvantages in a barter system.
Many goods, especially perishable ones, are hard to store for long periods. This can lead to loss of value and limits the types of goods suitable for bartering.
Why does a barter system discourage specialization and division of labor?
Specialization means focusing on producing a limited range of goods. In a barter system, finding someone who needs your specialized goods and also has something you need in return becomes very difficult, deterring specialization.
