Page 1
229
Economic Life Around Us
11 – From Barter to Money
CHAPTER
11
From Barter to Money
The importance of money flows from it being a link
between the present and the future.
1. How did exchange take place
before money?
2. Why did money come into
existence?
3. How has money transformed
into various forms over time?
The Big
Questions
– John Maynard Keynes
20th century economist
In the theme “Tapestry of the Past”, you read about the crops
that people grew, such as food grains or goods they made like
carnelian beads. How do you think they exchanged these
goods for things that they needed?
Fig. 11.1
Chapter 11.indd 229 Chapter 11.indd 229 08-04-2025 12:58:29 08-04-2025 12:58:29
Page 2
229
Economic Life Around Us
11 – From Barter to Money
CHAPTER
11
From Barter to Money
The importance of money flows from it being a link
between the present and the future.
1. How did exchange take place
before money?
2. Why did money come into
existence?
3. How has money transformed
into various forms over time?
The Big
Questions
– John Maynard Keynes
20th century economist
In the theme “Tapestry of the Past”, you read about the crops
that people grew, such as food grains or goods they made like
carnelian beads. How do you think they exchanged these
goods for things that they needed?
Fig. 11.1
Chapter 11.indd 229 Chapter 11.indd 229 08-04-2025 12:58:29 08-04-2025 12:58:29
230
Exploring Society: India and Beyond | Grade 7 Part 1
People exchanged goods or services for other goods and
services. This system is called the barter system. How did
this work? Suppose you need a pencil and have an extra
eraser. Meanwhile, your classmate forgot to bring their
eraser but has an extra pencil. You could exchange your
extra eraser for the extra pencil that your classmate has.
Wouldn’t this satisfy your and the classmate’s needs? This
is how the barter system works.
Today, we use coins and notes to buy and sell things. People
also use their mobile phones and computers for such
transactions.
The barter system was the earliest form of exchange. There
is a lot of evidence of it from around the world. People
used commodities such as cowrie shells, salt, tea, tobacco,
cloth, cattle (cows, goats, horses, sheep), seeds, etc.
Transaction:
a piece of
business
that is done
between
people,
especially an
act of buying
or selling.
Commodities:
Products
or goods
that can
be traded,
bought
and sold.
Barter
System:
a way of
exchanging
goods and
services
without using
mone y .
Money:
the common
tool that
everybody
accepts and
uses in order
to make
or receive
payments in
exchange for
goods and
services.
Fig.11.2.2. The Aztec copper
Tajadero (Spanish word for
chopping knife) was a form of
money used in Central Mexico
and parts of Central America.
Fig. 11.2.1. Stone Money: Giant
discs of rock – called Rai stones
– were used as money on the
Yap Island, in the Pacific Ocean
country of Micronesia.
Fig. 11.2.3.Tevau (Red
feather coil made from birds’
feathers) used as money on
the Solomon Islands.
Chapter 11.indd 230 Chapter 11.indd 230 08-04-2025 12:58:31 08-04-2025 12:58:31
Page 3
229
Economic Life Around Us
11 – From Barter to Money
CHAPTER
11
From Barter to Money
The importance of money flows from it being a link
between the present and the future.
1. How did exchange take place
before money?
2. Why did money come into
existence?
3. How has money transformed
into various forms over time?
The Big
Questions
– John Maynard Keynes
20th century economist
In the theme “Tapestry of the Past”, you read about the crops
that people grew, such as food grains or goods they made like
carnelian beads. How do you think they exchanged these
goods for things that they needed?
Fig. 11.1
Chapter 11.indd 229 Chapter 11.indd 229 08-04-2025 12:58:29 08-04-2025 12:58:29
230
Exploring Society: India and Beyond | Grade 7 Part 1
People exchanged goods or services for other goods and
services. This system is called the barter system. How did
this work? Suppose you need a pencil and have an extra
eraser. Meanwhile, your classmate forgot to bring their
eraser but has an extra pencil. You could exchange your
extra eraser for the extra pencil that your classmate has.
Wouldn’t this satisfy your and the classmate’s needs? This
is how the barter system works.
Today, we use coins and notes to buy and sell things. People
also use their mobile phones and computers for such
transactions.
The barter system was the earliest form of exchange. There
is a lot of evidence of it from around the world. People
used commodities such as cowrie shells, salt, tea, tobacco,
cloth, cattle (cows, goats, horses, sheep), seeds, etc.
Transaction:
a piece of
business
that is done
between
people,
especially an
act of buying
or selling.
Commodities:
Products
or goods
that can
be traded,
bought
and sold.
Barter
System:
a way of
exchanging
goods and
services
without using
mone y .
Money:
the common
tool that
everybody
accepts and
uses in order
to make
or receive
payments in
exchange for
goods and
services.
Fig.11.2.2. The Aztec copper
Tajadero (Spanish word for
chopping knife) was a form of
money used in Central Mexico
and parts of Central America.
Fig. 11.2.1. Stone Money: Giant
discs of rock – called Rai stones
– were used as money on the
Yap Island, in the Pacific Ocean
country of Micronesia.
Fig. 11.2.3.Tevau (Red
feather coil made from birds’
feathers) used as money on
the Solomon Islands.
Chapter 11.indd 230 Chapter 11.indd 230 08-04-2025 12:58:31 08-04-2025 12:58:31
231
Economic Life Around Us
11 – From Barter to Money
Why Do we Need Money?
LET’S EXPLORE
Imagine that you are a
farmer and that people
use a barter system where
you live. You need a whole
variety of things — a pair
of new shoes, a sweater,
and medicines for your
grandmother. But you only
have an ox that you can
spare. How would you be
able to exchange the ox for
all the different things you
need from different people or
places? What difficulties are
you likely to face?
For one, you would have to
find someone who needed an
ox. Now, swapping your ox for
a pair of shoes would hardly be a fair exchange! You may have
had to go through a series of exchanges — for example, find
someone to exchange your ox
for several bags of wheat. You
would then have to transport
all that wheat to several
places; first, find someone
willing to exchange a part of
the wheat for shoes, another
person for the sweater, and
yet another for the medicines.
Chapter 11.indd 231 Chapter 11.indd 231 08-04-2025 12:58:32 08-04-2025 12:58:32
Page 4
229
Economic Life Around Us
11 – From Barter to Money
CHAPTER
11
From Barter to Money
The importance of money flows from it being a link
between the present and the future.
1. How did exchange take place
before money?
2. Why did money come into
existence?
3. How has money transformed
into various forms over time?
The Big
Questions
– John Maynard Keynes
20th century economist
In the theme “Tapestry of the Past”, you read about the crops
that people grew, such as food grains or goods they made like
carnelian beads. How do you think they exchanged these
goods for things that they needed?
Fig. 11.1
Chapter 11.indd 229 Chapter 11.indd 229 08-04-2025 12:58:29 08-04-2025 12:58:29
230
Exploring Society: India and Beyond | Grade 7 Part 1
People exchanged goods or services for other goods and
services. This system is called the barter system. How did
this work? Suppose you need a pencil and have an extra
eraser. Meanwhile, your classmate forgot to bring their
eraser but has an extra pencil. You could exchange your
extra eraser for the extra pencil that your classmate has.
Wouldn’t this satisfy your and the classmate’s needs? This
is how the barter system works.
Today, we use coins and notes to buy and sell things. People
also use their mobile phones and computers for such
transactions.
The barter system was the earliest form of exchange. There
is a lot of evidence of it from around the world. People
used commodities such as cowrie shells, salt, tea, tobacco,
cloth, cattle (cows, goats, horses, sheep), seeds, etc.
Transaction:
a piece of
business
that is done
between
people,
especially an
act of buying
or selling.
Commodities:
Products
or goods
that can
be traded,
bought
and sold.
Barter
System:
a way of
exchanging
goods and
services
without using
mone y .
Money:
the common
tool that
everybody
accepts and
uses in order
to make
or receive
payments in
exchange for
goods and
services.
Fig.11.2.2. The Aztec copper
Tajadero (Spanish word for
chopping knife) was a form of
money used in Central Mexico
and parts of Central America.
Fig. 11.2.1. Stone Money: Giant
discs of rock – called Rai stones
– were used as money on the
Yap Island, in the Pacific Ocean
country of Micronesia.
Fig. 11.2.3.Tevau (Red
feather coil made from birds’
feathers) used as money on
the Solomon Islands.
Chapter 11.indd 230 Chapter 11.indd 230 08-04-2025 12:58:31 08-04-2025 12:58:31
231
Economic Life Around Us
11 – From Barter to Money
Why Do we Need Money?
LET’S EXPLORE
Imagine that you are a
farmer and that people
use a barter system where
you live. You need a whole
variety of things — a pair
of new shoes, a sweater,
and medicines for your
grandmother. But you only
have an ox that you can
spare. How would you be
able to exchange the ox for
all the different things you
need from different people or
places? What difficulties are
you likely to face?
For one, you would have to
find someone who needed an
ox. Now, swapping your ox for
a pair of shoes would hardly be a fair exchange! You may have
had to go through a series of exchanges — for example, find
someone to exchange your ox
for several bags of wheat. You
would then have to transport
all that wheat to several
places; first, find someone
willing to exchange a part of
the wheat for shoes, another
person for the sweater, and
yet another for the medicines.
Chapter 11.indd 231 Chapter 11.indd 231 08-04-2025 12:58:32 08-04-2025 12:58:32
232
Exploring Society: India and Beyond | Grade 7 Part 1
In each of these cases, a discussion would take place to arrive
at the fair amount of wheat that you could exchange for shoes
or for the sweater.
You would have to take the
leftover bags of wheat and find
a place to store them safely.
The next time you needed
something, you would have to
carry the bags of wheat with
you again!
THINK ABOUT IT
What are the different types of difficulties you encountered
in the situation above?
In the farmer’s story, imagine he finds someone who
is willing to trade a pair of new shoes, a sweater, and
Chapter 11.indd 232 Chapter 11.indd 232 08-04-2025 12:58:33 08-04-2025 12:58:33
Page 5
229
Economic Life Around Us
11 – From Barter to Money
CHAPTER
11
From Barter to Money
The importance of money flows from it being a link
between the present and the future.
1. How did exchange take place
before money?
2. Why did money come into
existence?
3. How has money transformed
into various forms over time?
The Big
Questions
– John Maynard Keynes
20th century economist
In the theme “Tapestry of the Past”, you read about the crops
that people grew, such as food grains or goods they made like
carnelian beads. How do you think they exchanged these
goods for things that they needed?
Fig. 11.1
Chapter 11.indd 229 Chapter 11.indd 229 08-04-2025 12:58:29 08-04-2025 12:58:29
230
Exploring Society: India and Beyond | Grade 7 Part 1
People exchanged goods or services for other goods and
services. This system is called the barter system. How did
this work? Suppose you need a pencil and have an extra
eraser. Meanwhile, your classmate forgot to bring their
eraser but has an extra pencil. You could exchange your
extra eraser for the extra pencil that your classmate has.
Wouldn’t this satisfy your and the classmate’s needs? This
is how the barter system works.
Today, we use coins and notes to buy and sell things. People
also use their mobile phones and computers for such
transactions.
The barter system was the earliest form of exchange. There
is a lot of evidence of it from around the world. People
used commodities such as cowrie shells, salt, tea, tobacco,
cloth, cattle (cows, goats, horses, sheep), seeds, etc.
Transaction:
a piece of
business
that is done
between
people,
especially an
act of buying
or selling.
Commodities:
Products
or goods
that can
be traded,
bought
and sold.
Barter
System:
a way of
exchanging
goods and
services
without using
mone y .
Money:
the common
tool that
everybody
accepts and
uses in order
to make
or receive
payments in
exchange for
goods and
services.
Fig.11.2.2. The Aztec copper
Tajadero (Spanish word for
chopping knife) was a form of
money used in Central Mexico
and parts of Central America.
Fig. 11.2.1. Stone Money: Giant
discs of rock – called Rai stones
– were used as money on the
Yap Island, in the Pacific Ocean
country of Micronesia.
Fig. 11.2.3.Tevau (Red
feather coil made from birds’
feathers) used as money on
the Solomon Islands.
Chapter 11.indd 230 Chapter 11.indd 230 08-04-2025 12:58:31 08-04-2025 12:58:31
231
Economic Life Around Us
11 – From Barter to Money
Why Do we Need Money?
LET’S EXPLORE
Imagine that you are a
farmer and that people
use a barter system where
you live. You need a whole
variety of things — a pair
of new shoes, a sweater,
and medicines for your
grandmother. But you only
have an ox that you can
spare. How would you be
able to exchange the ox for
all the different things you
need from different people or
places? What difficulties are
you likely to face?
For one, you would have to
find someone who needed an
ox. Now, swapping your ox for
a pair of shoes would hardly be a fair exchange! You may have
had to go through a series of exchanges — for example, find
someone to exchange your ox
for several bags of wheat. You
would then have to transport
all that wheat to several
places; first, find someone
willing to exchange a part of
the wheat for shoes, another
person for the sweater, and
yet another for the medicines.
Chapter 11.indd 231 Chapter 11.indd 231 08-04-2025 12:58:32 08-04-2025 12:58:32
232
Exploring Society: India and Beyond | Grade 7 Part 1
In each of these cases, a discussion would take place to arrive
at the fair amount of wheat that you could exchange for shoes
or for the sweater.
You would have to take the
leftover bags of wheat and find
a place to store them safely.
The next time you needed
something, you would have to
carry the bags of wheat with
you again!
THINK ABOUT IT
What are the different types of difficulties you encountered
in the situation above?
In the farmer’s story, imagine he finds someone who
is willing to trade a pair of new shoes, a sweater, and
Chapter 11.indd 232 Chapter 11.indd 232 08-04-2025 12:58:33 08-04-2025 12:58:33
233
Economic Life Around Us
11 – From Barter to Money
medicines — all in exchange for his ox. Do you think it
would be easy to come across such a situation?
Just like the farmer, people who depended on the barter
system would face many problems in making an exchange
in their everyday lives. They would have to find someone
who wants the exact item that they want to give, and in
return are also able to offer exactly what the other party
wants. This scenario is called double coincidence of wants.
Even if there are two people who want each other’s goods
and are also willing to make an exchange, other issues
could arise — in what proportion should the two goods be
exchanged? In such cases, it becomes difficult to compare
the value of one good against another. If one of the people
feels that the exchange is disadvantageous, they would not
be interested in the exchange. This is because there is no
common standard measure of value.
THINK ABOUT IT
What are the instances of double coincidence of wants in the
above example?
Even if there are two people who want each other’s goods and are
also willing to make an exchange, other issues could arise — in
what proportion should the two goods be exchanged? In such
cases, it becomes difficult to compare the value of one good
against another. If one of the people feels that the exchange is
disadvantageous, they would not be interested in the exchange.
This is because there is no common standard measure of value.
In the situation given above, what are the cases where you could
encounter the lack of a common standard measure of value?
Similarly, you cannot exchange only a part of the ox for
a sweater; this is the problem of divisibility. Taking the
ox everywhere is a problem and leads to the problem of
portability. You solved part of the problem by exchanging
Double
coincidence
of wants: an
economic
concept that
describes a
situation where
two people
each have
something
the other
wants and can
exchange them
directly.
Common
standard
measure of
value: an
agreed-upon
worth for a
transaction
that helps in
determining
the value of
goods and
services in the
economy.
Divisibility:
The capacity
of an object
or material
to be split
into pieces or
portions.
Portability:
The ability
of an
object or
material to
be carried
or moved
from one
place to
another.
Chapter 11.indd 233 Chapter 11.indd 233 08-04-2025 12:58:33 08-04-2025 12:58:33
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