What are the Disadvantages of the Barter System?

By Priya Gupta|Updated : July 22nd, 2022

The disadvantages of the Barter system include 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. Let us learn more about the disadvantages of the Barter system below.

6 Major Disadvantages of the Barter System

The exchange of goods and services without the use of money is known as the Barter system of the economy. For example, if a carpenter needs rice and wheat to cook food for his family, she/he will be giving some goods or services to the farmer in exchange which should be of the same worth as of rice and wheat. Let us discuss what are the disadvantages of the Barter system in detail:

  • 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, to come 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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FAQs on What are the Disadvantages of the Barter System?

  • Some of the major drawbacks of the Barter System are Lack of double coincidence of wants, no common unit of exchange, lack of specialization, difficulty in storing wealth, etc.

  • The Barter System has its own advantages and disadvantages. It is a traditional method of trading goods. Some of the advantages are simple to use, no concentration of power, no overexploitation of natural resources, etc. On the other hand, the disadvantages of the Barter system include Indivisibility of certain products, lack of double coincidence of wants, inefficiency in the storage of products, etc.

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