What are the Disadvantages of the Barter System?
By BYJU'S Exam Prep
Updated on: November 9th, 2023
The Disadvantages of the Barter System include the inefficiency of storing wealth for a longer duration, not feasible for large economies, difficulty to get the desired product in exchange, and many more. The Barter system is a traditional method of making transactions without the use of money. It involves exchanging goods and services with mutual understanding and needs.
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Drawbacks of Barter System
The Barter system of the economy refers to the exchange of goods and services without the use of money. For instance, if a carpenter needs rice and wheat to prepare food for his family, he or she will trade the farmer some goods or services of equivalent value for the rice and wheat. Let’s go into more detail about the drawbacks of the barter system:
- Lack of Common Measure of Value: One of the disadvantages of the Barter system is having no common unit to measure the worth of goods and services. Hence, the problem arises with the proportion of goods to be shared.
- Lack of Double Coincidence of Wants: It is unlikely that two people want to exchange their products or services at the same time. If one needs a product, it is possible that the other person might not have the demand for the product offered in return.
- Problems in Storing Wealth: Unlike money, it is difficult to store goods and services for a longer duration of time. Products must be consumed within a specific time frame. Hence, there is difficulty in storing wealth in the Barter system.
- Division of Certain Products is not possible: A trader cannot divide certain goods such as shoes, animals, cupboards, etc in half. Therefore, coming at a common rate of exchange becomes difficult.
- Lack of Specialization: In the Barter system, a high specialization is difficult to achieve.
- Difficulty in Making Future Payments: Having a debt contract for future payments is difficult to make in the Barter System.
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