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Limitations of Barter System Script

The document discusses several difficulties with the barter system, including the lack of double coincidence of wants where finding someone with the exact commodity needed for exchange is difficult, the lack of a common measure of value making it hard to set exchange ratios, and the indivisibility of certain goods preventing exchanges.

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Dhrisha Gada
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109 views10 pages

Limitations of Barter System Script

The document discusses several difficulties with the barter system, including the lack of double coincidence of wants where finding someone with the exact commodity needed for exchange is difficult, the lack of a common measure of value making it hard to set exchange ratios, and the indivisibility of certain goods preventing exchanges.

Uploaded by

Dhrisha Gada
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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DHRISHA - Lack of Double Coincidence of Wants: 

Double coincidence of wants occurs when one


person has the exact commodity which another one wants in return for his commodity. There must be a
simultaneous fulfillment of wants of the people involved in the exchange in the form of commodities
exchanged. However, this may not be possible under barter system or without the use of money because
finding a person having a commodity which one requires in exchange for what one has is a very difficult
task. The inability of one person to find such another person is known as the lack of double incidence of
wants.
RUHIE - Lack of Common Measure of Value: In the barter system, all commodities are not of equal
value and there is no common measure (unit) of value of goods and services, in which exchange ratios
can be expressed. For example, if A has wheat and B has rice, then it is difficult to decide, how much
wheat is needed to exchange with one kilogram of rice. In the absence of common measure, the exchange
ratio is fixed randomly, in which one of the party generally suffers. Barter system can work with few
commodities in the primitive society. However, it is very difficult in the modern economy, where we need
millions of exchange ratios for a large number of goods and services.

ANGEL - Indivisibility of Certain Goods: If a person wants to buy a certain amount of another's goods,
but only has for payment one indivisible unit of another good which is worth more than what the person
wants to obtain, a barter transaction cannot occur. The barter system is based on the exchange of goods
with other goods. It is difficult to fix exchange rates for certain goods which are indivisible. Such
indivisible goods pose a real problem, under barter. A person may desire a horse and the other a sheep
and both may be willing to trade. The former may demand more than four sheep for a horse but the other
is not prepared to give five sheep and thus there is no exchange.

VAISHVI - Difficulty in Storing Value: Under the barter system it is difficult to store value. Anyone
wanting to save real capital over a long period would be faced with the difficulty that during the
intervening period the stored commodity may become obsolete or deteriorate in value. As people trade in
cattle, grains, and other such perishable commodities, it is very expensive and often difficult to store and
to prevent their deterioration and loss over the long period.

DHRISHA – 6TH SLIDE SUMMARY

QUIZ –

1. Which one is the difficulty of Barter System?


(a) Lack of Double Coincidence
(b) Difficulty of Division of the Goods
(c) Lack of General Acceptable Measure of Value
(d) All the above

2. The exchange of goods for goods is:

a) banker of option

b) bills of exchange

c) barter

d) currency
2. Store of value
3. a. something that is
generally acceptable in
exchange for goods and
4. services
5. b. a legally recognized
asset that is generally
accepted in exchange for
6. goods and services.
7. c. something that circulates
and provides a standardized
means of
8. evaluating the relative
price of goods and services.
9. d. the ability of money to
command purchasing power
in the future
10. Store of value
11. a. something that is
generally acceptable in
exchange for goods and
12. services
13. b. a legally recognized
asset that is generally
accepted in exchange for
14. goods and services.
15. c. something that circulates
and provides a standardized
means of
16. evaluating the relative
price of goods and services.
17. d. the ability of money to
command purchasing power
in the future
18. Store of value
19. a. something that is
generally acceptable in
exchange for goods and
20. services
21. b. a legally recognized
asset that is generally
accepted in exchange for
22. goods and services.
23. c. something that circulates
and provides a standardized
means of
24. evaluating the relative
price of goods and services.
25. d. the ability of money to
command purchasing power
in the future
26. Store of value
27. a. something that is
generally acceptable in
exchange for goods and
28. services
29. b. a legally recognized
asset that is generally
accepted in exchange for
30. goods and services.
31. c. something that circulates
and provides a standardized
means of
32. evaluating the relative
price of goods and services.
33. d. the ability of money to
command purchasing power
in the future
34. Store of value
35. a. something that is
generally acceptable in
exchange for goods and
36. services
37. b. a legally recognized
asset that is generally
accepted in exchange for
38. goods and services.
39. c. something that circulates
and provides a standardized
means of
40. evaluating the relative
price of goods and services.
41. d. the ability of money to
command purchasing power
in the future
42. Store of value
43. a. something that is
generally acceptable in
exchange for goods and
44. services
45. b. a legally recognized
asset that is generally
accepted in exchange for
46. goods and services.
47. c. something that circulates
and provides a standardized
means of
48. evaluating the relative
price of goods and services.
49. d. the ability of money to
command purchasing power
in the future
50. Store of value
51. a. something that is
generally acceptable in
exchange for goods and
52. services
53. b. a legally recognized
asset that is generally
accepted in exchange for
54. goods and services.
55. c. something that circulates
and provides a standardized
means of
56. evaluating the relative
price of goods and services.
57. d. the ability of money to
command purchasing power
in the future1.

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