Q. 75.0( 3 Votes )

Explain any three drawbacks of the barter system.

Answer :


The barter system is the traditional form of transferring the goods and services for other goods and services. It is an old method of exchange. This system has been used for centuries and long before money was invented. People exchanged services and goods for other services and goods in return. Some of the major drawbacks of the system are:


Double coincidence of wants: One of the most important drawbacks of the barter system was a double coincidence of wants in which the buyer and seller should agree to buy and sell each other's commodity in exchange. It is very difficult to find the buyer who is need of commodity which the seller wants to sell.


Lack of proper valuation of goods: In a barter system there will not be an equal valuation of the goods. There will be no existence of costly good or cheaper goods. All the goods will be equal.


Store of value: Barter system lacks the function of store of value because the sold commodities cannot be saved for future use whereas money can be easily saved as a deposit. The goods do not possess the quality to use for future requirements.


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