Question

Give reason or explain. 

Barter System had many difficulties.

Answer 1

Barter system had many difficulties.  The difficulties in barter system were :

i. Problem of double coincidence of wants:  Double coincidence of wants implies that the needs of any two individuals should complement each other for the exchange to take place. However, in reality, it is very difficult to find an individual who possesses the goods and services that are needed by another individual at the same time in exchange of what he/she has.
ii. Lack of a common unit of value: Under the barter system of exchange, there was no common unit for measuring the value of one good in terms of another good for the purpose of exchange.
iii. Difficulty in wealth storage and transfer of value: Individuals tend to store a part of their wealth or earnings as savings to be used for future needs or as an investment. However, it is very difficult to store many types of commodities.
iv. Lack of standard of deferred payments: It was very difficult to make future payments and contractual payments such as salaries, loans, interest payments etc. For example, it was difficult to decide whether wages for labour are to be paid in terms of food grains or any other commodity.