5 Questions
What is the most serious problem in barter system?
Lack of double coincidence of wants
Why does the absence of a common unit of measure pose a problem in the barter system?
Values of different goods and services cannot be compared
How does the lack of store of value impact the barter system?
Stored commodities may lose value over time
What is a disadvantage of the barter system regarding future payments?
Lack of any satisfactory unit for deferred payments
How can the lack of double coincidence of wants be explained?
Seller must find someone willing to purchase and sell his goods
Study Notes
Barter System Limitations
- The most serious problem in the barter system is the absence of a common unit of measure, which makes it difficult to determine the value of goods and services.
Lack of Store of Value
- In a barter system, there is no store of value, making it challenging to save for the future or make long-term plans.
Future Payments
- A major disadvantage of the barter system is the difficulty in making future payments, as it relies on the simultaneous fulfillment of wants and needs.
Double Coincidence of Wants
- The lack of double coincidence of wants occurs when two parties do not have what the other wants at the same time, making it hard to facilitate exchange in a barter system.
Explore the difficulties associated with the barter system, such as the lack of double coincidence of wants, absence of a common unit of measure for value, and the lack of a reliable store of value. Understand the limitations that led to the development of modern currency and trade systems.
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