The Drawbacks Of The Barter System

838 Words4 Pages

Centuries ago when there was no perception of money, people traded goods with goods and goods with services. For example, a farmer directly exchanged vegetables with cloth produced by weavers or he used to exchange fruits with meat etc.

At that time everybody looked for a person for the trading of goods and services, but the double coincidence of human wants used to take place rarely. For example, a person having wheat looked for a person having cloth and is ready to exchange it with wheat.

This rarely happened. What happened so often was that a person having cloth used to be ready to get it exchanged but not with wheat. In this way inadequacy of dual coincidence of wants involved a lot of wastage of time and even then it was hard to easily …show more content…

It was highly difficult to do so because they had to face many mishaps on their way. Hence, their business cycle remained limited and also the markets of goods and services could not be extended.

Evolution Of Money
We have noted above various drawbacks of the barter system. In order to overcome these drawbacks, there was a need to evolve suitable medium of exchange so that goods and services are transacted easily. People at the time tried many commodities e.g animals, salt, stone, skin etc as the commonplace of trade.

These commodities failed to perform the functions of money or the commonplace of exchange because some of them lacked double durability, other lacked characteristics of indivisibility. After a long time, people ultimately found a suitable medium of exchange in the form of gold and silver metals. In this way, metallic money in the pattern of metallic coins came into existence.

In the eighteenth century, there was an outbreak of industrial revolution in all countries of Europe due to which economies expanded. Therefore the use of money also extended. Metallic money couldn't meet the requirements because it was difficult to make large payments in coins and their transference from one area to another was

Open Document