Challenges of Barter System

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Questions and Answers

What is the most serious problem in barter system?

  • Lack of store of value
  • Lack of double coincidence of wants (correct)
  • Problem of future payments
  • Absence of common unit of measure

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 (correct)
  • It leads to constant value of each commodity in the market
  • It affects future payments for any contracts
  • It makes storing wealth more difficult

How does the lack of store of value impact the barter system?

  • It increases the overall wealth in the system
  • It leads to easy storage of wealth
  • Stored commodities may lose value over time (correct)
  • It simplifies future payments for contracts

What is a disadvantage of the barter system regarding future payments?

<p>Lack of any satisfactory unit for deferred payments (D)</p> Signup and view all the answers

How can the lack of double coincidence of wants be explained?

<p>Seller must find someone willing to purchase and sell his goods (C)</p> Signup and view all the answers

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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.

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