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2 Barter

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Soraiya Mohammed
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16 views15 pages

2 Barter

Uploaded by

Soraiya Mohammed
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
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Man engaged in trading his surplus, this

means satisfying his needs indirectly. The


process of exchange that was used then
to satisfy needs indirectly is called Barter.
Barter is the exchange of goods or
services without the use of money.
 This
means of exchange is still practiced
today by individuals, firms and countries.

Chavez Caribbean
For example, in early times, if family A
produced more products than it could
consume, exchange would be sought. If
family B wanted what family A had for
exchange, and likewise, if family B had
what family A wanted in exchange, then
exchange would take place. Thus, good
can be exchanged for good.
Advantages of Barter
 Surplus products were disposed of through the
barter system.
 Barter allowed a person to get what he did not
have or probably could not produce.
 Trading could take place without money.
 Countries with foreign currency problems can
barter and so save well needed foreign currency
for use or vital items such as drugs for the sick.
 The system facilitates the barter of goods and
services today.
Disadvantages of Barter
 Double Coincidence of Wants – A person had to
find someone else who wanted what he had to
exchange and that person had to have what was
needed, before exchange could take place.
 Time Consumption – It could be challenging to
find willing partners.
 Spoilage - If an individual failed to find a willing
partner within a reasonable time one’s
perishable goods could be destroyed.
 An exchange Rate - There is the difficulty of
unequal exchange where the value of one’s
goods far outweigh the value of other goods.
 Divisibility of Goods - Some goods cannot be
divided without destroying its value. For
example, suppose Simon had a horse and
wanted corn, peas, yam and rice which were
owned by different persons. No deal can take
place because there would be no way of dividing
the horse to satisfy the various exchanges
without destroying its value.
 No standard unit - There is the difficulty of a
standard unit for measuring the goods. A
person may be willing to accept corns for yam
today, and tomorrow peas or even something
else. It would be easier to state the value of the
corn against one particular good.

With all the difficulties affecting the Barter


System a stable system of exchange had
to be developed that would not be plagued
with the problem of barter.
January 2005 Question 1
 Explain how bartering is done.[2]
 Identify TWO problems associated with
Bartering.[2]
 State how money can be used to
overcome the TWO problems you
identified in b. above. [4]
 Outline how a money economy operates.
[2]
Multiple Choice 1.
 Man is termed an ‘economic animal’ because he
 Has the ability to understand economic
activities.
 Lives a life which is governed by economic
principles.
 Studies economics in order to live a comfortable
life.
 Utilizes his ability to satisfy his wants from the
gifts of nature.
Multiple Choice 2.
 Before Barter evolved, man’s wants were
satisfied through
 A. A system of hunting and food gathering
by families
 B. A system of exchange of goods and
services
 C. the manufacture of raw materials into
finished products.
 D. The purchase of goods for money.
Multiple Choice 3.
 Direct satisfaction of wants entailed
 A. obtaining goods through Barter
 B. Paying only for goods of a high quality
 C. producing one’s own goods and
services
 Producing goods through a process of
specialization.
Multiple Choice 4.
 Barter may be described as the
 A. bargaining for quality goods at cheaper
prices.
 B. credit sale and purchase of goods.
 C. exchange of goods for goods.
 D. exchange of goods for money.
Multiple Choice 5
 Ancient man satisfied his needs by
 Depending entirely on others
 Using his own initiatives
 Buying what he wants
 Trading with people of otherlands
Multiple Choice 6
A system involving the exchange of goods
depending on the ‘double coincidence of
wants’ is known as
 Money
 Barter
 Specialization
 Equal exchange

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