What are its drawbacks? Barter system was used in ancient times for the exchange goods. It was a system where one commodity, product or some goods was exchanged for another.
In a search for a person to exchange their surplus, in a barter system, a person would end up incurring very high costs. Taking into consideration the same example of rice, these are perishable goods, one cannot save it like money, moreover money is not perishable.
Money is a medium of exchange, whereas in the barter system, one type of good is swapped for another sort of goods instead of money. Wealth cannot be carried forward under the barter system since surplus rice cannot be stored for lengthy periods of time due to the commodity’s perishability.
For example, if a person is looking to barter surplus rice, then a lot of resources and time would be spent on finding the person who would be willing to exchange goods that you need. Moreover storing rice also would require a lot of space, if there are space constraints then it would be a problem.
Drawbacks of Barter System 1 In a large economy, Barter exchanges are not feasible. 2 Under the barter system, it is not feasible to carry forward one’s wealth. 3 In a search for a person to exchange their surplus, in a barter system, a person would end up incurring very high costs. 4 Taking into consideration the same example of rice, these are perishable goods, one cannot save it like money, moreover money is not perishable. 5 For example, if a person is looking to barter surplus rice, then a lot of resources and time would be spent on finding the person who would be willing to exchange goods that you need. 6 Moreover storing rice also would require a lot of space, if there are space constraints then it would be a problem.
For example, if a person is looking to barter surplus rice, then a lot of resources and time would be spent on finding the person who would be willing to exchange goods that you need.
In a large economy, Barter exchanges are not feasible. Under the barter system, it is not feasible to carry forward one’s wealth. In a search for a person to exchange their surplus, in a barter system, a person would end up incurring very high costs.