Chapter 14.1, Problem 5R

To determine

To evaluate: The advantages of money over the barter system.

Explanation of Solution

Bartering structures have been used within the local community, but developments in technology and transport allow modern society to trade internationally. It led to the development of currency systems, has its constraints. Common goods agreed upon in early cultures, such as animal skins or salt, acted as a currency that individuals might trade for goods and services.

Money value is divisible and can be used for large and small items, high value goods and lower value goods in exchange. Money is robust compared with some of the products used for barter trade. Money is also simple to bring or convenient to carry to market, that since the people who used the barter system used to carry to and fro the market place is not as difficult as the cows and grains. The key benefit of money, therefore, is that it can be traded for something. Anyone will take money because they still find it useful. The stuff that I have to sell, on the other hand, may not be useful to different people, so it would be much harder to find opportunities to exchange. the issue of double coincidence is invalid compared to barter trade, which is only appropriate when there is double coincidence.

Economics Concept Introduction

Introduction: Barter is an exchange process in which the transaction participants directly trade goods or services for other services and goods without using a means of trade, such as money.