What is limitation of barter system explain?

Question

Answer

Bhai...

limitaions are

= Double coincidence of want

=

There are many products which cannot be divided.

=

Deciding the value of goods is difficult.

Answer

Hello Akarsh,

Limitations of Barter System :

【】There are many products which cannot be divided.

【】Deciding the value of goods is difficult. e.g 1 kg wheat for a pair shirt while Shirt owner can demand 2 kg wheat for that shirt.

【】Double coincidence of wants is necessary. It means that Both parties have to agree to sell and buy each others commodities.e.g if a farmer wants to sell his wheat in exchange of shirt he has to find a shirt owner who wants to exchange shirt for wheat.

Thanks for asking the question, keep learning.

Answer

The limitation of barter system is that there might be a double coincidence of wants

Answer

Barter system is based on double coincidence of want  it means in barter system it is very difficult to find a person who wants which thing in  exchange of what.

Answer

The major limitations of Barter Exchange are:

Lack of Double Coincidence of Wants: Barter system can work only when both buyer and seller are ready to exchange each other's goods. ...

Lack of Common Measure of Value: ADVERTISEMENTS: ...

Lack of Standard of Deferred Payment: ...

Lack of Store of Val

Answer

The double coincidence of wants is the major drawback of the barter system.

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Double coincidence of wants

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Barter system leads to the double coincidence of wants where both the party have to agree to buy and sell each others commodities.

Answer

Limitations of the Barter System

The barter system is a traditional method of trade where goods and services are directly exchanged without the involvement of money. While it was widely used in ancient times, it is not a practical or efficient system for modern economies. The following are the key limitations of the barter system:

Lack of Double Coincidence of Wants
In a barter system, for a trade to take place, both parties must have what the other party desires. This requirement is known as the double coincidence of wants. However, it is often difficult to find two parties with complementary needs at the same time and place, which leads to transactional difficulties and delays.

Difficulty in Division and Subdivision
Another limitation of barter is the challenge of dividing goods into smaller units for exchange. Many goods, such as livestock or land, cannot be easily divided, making it impractical to trade in small quantities. This lack of divisibility restricts trade and limits the efficiency of the system.

Lack of Standardized Value
In a barter system, there is no standard measure of value for goods and services. Each item has its own unique value, which makes it challenging to establish fair exchange rates. This lack of standardized value leads to disputes and disagreements between trading parties, hindering smooth transactions.

Limited Scope of Trade
The barter system is constrained by the limited availability of goods and services. The range of items available for direct exchange may be limited to what individuals or communities produce locally. This restricts the opportunities for trade and limits economic growth.

Lack of Store of Value
One of the essential functions of money is to serve as a store of value, allowing individuals to save their wealth for future use. In a barter system, perishable goods or items with fluctuating demand cannot effectively serve as a store of value. This limitation reduces the ability to accumulate wealth and plan for the future.

Difficulty in Assessing Relative Value
Determining the relative value of different goods and services in a barter system is complex and subjective. The value of an item may vary depending on individual preferences, scarcity, and other factors. This lack of a consistent and objective measure of value makes it challenging to negotiate fair trades.

Lack of Specialization and Efficiency
The barter system hinders specialization and the division of labor, which are crucial for economic efficiency. In a monetary economy, individuals can specialize in a specific skill or trade and exchange their expertise for various goods and services. In contrast, the barter system requires individuals to be self-sufficient or have a wide range of skills, limiting specialization and overall productivity.

Lack of Deferred Payment
Deferred payment, such as credit or loans, is not possible in a barter system. This limitation hampers the growth of businesses and inhibits investment and economic development. Without the ability to borrow or lend money, individuals and businesses struggle to expand their activities and improve their standard of living.

In conclusion, while the barter system may have served as a means of exchange in the past, it is not suitable for modern economies. Its limitations in terms of double coincidence of wants, divisibility, standardized value, scope of trade, store of value, assessing relative value, specialization, and deferred payment make it inefficient and impractical compared to monetary systems.

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