Question

State with reason whether you Agree or Disagree with the following statement:

There are no difficulties in the barter system.

Options

• Agree

• Disagree

Answer 1

I disagree with the given statement.

Reasons:

1. Lack of common measure of value: While exchanging goods for goods, there was no standard unit of account to determine the value of a commodity. For example, it was difficult to compare two litres of milk with two kilograms of rice.
2. Problem of double coincidence of wants: Lack of double co-incidence of wants was one of the major limitations of barter system. For instance, person ‘A’ has cloth and he wants rice in exchange and person ‘B’ has rice but he does not want cloth in exchange. In this case exchange between ‘A’ and ‘B’ would not take place as their wants do not coincide with each other.
3. Indivisibility of certain goods: In barter system it was inconvenient to divide animals, house etc. into small parts, so it was difficult to fix proportion of one commodity in exchange for another commodity, e.g., Individual 'A' has a sack of wheat and he wants a goat in exchange. Individual 'B' has a goat and he wants only half a sack of wheat. In this situation exchange between the two commodities is impossible due to indivisible nature of goat, for it being a live stock.
4. Difficulties in storage of goods: It is necessary to store goods for future consumption. Sometimes due to perishable nature of certain goods it was difficult to store them for future. Perishable commodities like milk, eggs, fish, vegetable etc. were difficult to store. Difficulties were also experienced due to lack of space required to store heavy and bulky goods.
5. Problem of making deferred payments: Deferred payment means payments to be made in future. Repayment of loan was difficult due to exchange of commodities.
   E.g. it was difficult to repay the perishable goods in the same condition in future.