Study for test Friday Flashcards
What is barter?
Barter is the exchange of one thing for another without the use of real money.
What is Direct Production?
The way early people met all their needs by themselves without the aid of others and without the facility of money.
What is a Subsistence Economy?
A Subsistence Economy is when just enough is provided for survival but not enough to improve their way of life
What is Surplus trade?
Trading their surplus goods in exchange for the surplus of others which granted access to a wider range of goods.
What are the four advantages of Barter?
The four advantages are: Easy disposal of surplus goods, Simple and Flexible, Natural resources were not exploited and It gave access to a wider range of goods.
What are the disadvantages of Barter?
A double coincidence of wants, An exchange rate, Divisibility of goods and Storage of Wealth.
Explain double coincidence of wants:
This meant that people had to find someone who wanted their surplus but the person they found needed to offer what they wanted too.
Explain the exchange rate:
Early people needed to decide on the quantities of eachother’s goods that were to be exchanged.
Explain the Divisibility of goods
Certain rates of exchange were not possible, some goods could not be split into smaller parts to fit the trade.
Explain the Storage of Wealth
Most goods which were exchanged could not be stored for a long period of time and usually expired.
What is the role of money
The role of money is to solve all the disadvantages of Barter.
What are some things used by early traders?
Early traders used: Dog’s teeth, shells and beads. These were called token money.
What are the characteristics of money?
Durability, it must be hard wearing, Acceptable, people must accept its use, Exchangeable, it can be exchanged for goods and services, Divisible, it is possible to split into smaller parts, Scarce, it maintains its value even when it is harder to acquire, Portable, it must be convenient to carry and Homogenous, a standardized appearance for each note of money.
What are the functions of money
a medium exchange, the exchange of goods is easier, A measure of value, money can be used to state values, A store of value, money can be saved whereas goods often cannot and a Standard with postponed payment, money can be made at one time and saved for another.
