Barter system

This topic is for class 12th students to understand the concept of Barter system.

1. BARTER SYSTEM BY: NAVNEET KAUR

2. WHAT DOES BARTER MEAN? Bartering is a system of exchange of some goods with other goods, where no money is involved .

3. WHAT IS BARTER ? The oldest system of trading. Is the exchange of goods and services between two parties without any involvement of cash. MEANING: Barter is a medium in which goods/services are exchanged directly without a common unit of exchange(MONEY)

4. EVOLUTION OF BARTERS…. History can be traced back to 6000BC. First introduced by the tribes of Mesopotamia. Initially used to trade weapons, food items , tea and spices. Even Roman soldiers salary was paid in barter by offering SALT. There have been proofs that purest form of barters were existing till 1874.

5. BARTER: WHAT PROBLEMS COULD ARISE? What Problems could arise? Analysis of this Economic system reveals three aspects that are considered as problem? Can you guess what they are?

6. Lack of coincidence of wants In Barter system goods were exchanged through goods. In this process wants of both buyer and the seller must coincidence. This is called Lack of coincidence of wants. Lack of coincidence of wants make the difficulty of Barter system

7. Barter- goods and services were traded without the exchange of money. However, before trade could occur there had to be a “double coincidence of wants”. Each trader had to have something the other wanted. I’ll trade you a chicken for a pair of shoes . I would love to sell you these shoes but I can’t eat chicken, due to my bad teeth, caused by smoking .

8. In a barter economy a chicken farmer who wants to buy shoes may have to first trade chickens for apples and then apples for shoes because the guy selling shoes wants only apples . Money eliminates this problem .

9. LACK STORE OF VALUE Some goods are perishable. They perish in a short period. So it was not possible to store the goods in Barter system for a long time.

10. Lack of divisibility of commodities In Barter system we cannot divide all the commodities into small units. It is also one of the problem of Barter system.

11. Lack of common measure of value In Barter system the value of every commodity can be measured in terms of others commodity. But it is not possible to measures the commodity value with other commodity.

12. Difficulty in making Deferred payments Deferred payment means future payments. Under Barter system future payment for present transaction was not possible. The future exchange involved some difficulties.

13. conclusion In order to overcome the discussed difficulties in barter system, money was invented in economy.