About Barter Economy

The first stage of exchange is called Forex. Under barter economics, the goods are exchanged for goods. This means that if one wants a commodity, this may be exchanged just by giving another commodity ahead of time. In a nutshell, barter economies signify the exchange of goods throughout the medium of goods. Nowadays, barter transactions have virtually disappeared. Many problems were faced during barter transactions. Generally, the main issues faced were as follows:

Deficiency of Double Coincidence of Wants: Barter trades may be possible only when two individuals desiring exchange of commodity should possess such commodity which is needed by every other.

For instance, if Ram wants the fabric that Shyma has, then Ram must have such commodity that Shyam wants. Nonetheless, it's very tough to find such individuals where there is a coincidence of wants.

Luck of Division: The 2nd issue of barter market relates to the market of such commodity that can't be divided. For instance, an individual has a cow and he wants fabric, food grains along with other items of consumption. Under such a condition, an exchange could be possible only when he discovers an individual, who is needing a cow and has all such commodity, but it is very tough to find this kind of individual.

Then how to affect the exchange? The second problem relates to the market of such commodity which can't be split into pieces because, in this type of scenario, a large commodity like a cow cannot be split into little bits for making payment of the merchandise of smaller value. Deficiency of a frequent measure of value was the main problem of the barter market, meaning the lack of common amount of value i.e., there wasn't any such commodity instead of which commodity may be bought and sold.

with the discovery of cash, this difficulty has been completely eliminated. Deficiency of store of value means that in barter economics, the store of value might be done only in the shape of commodities. Nevertheless, everyone knows that commodity are perishable plus they can't be kept for quite a long time in the store. Due to this difficulty, that the accumulation of capital or store of worth was very hard and without that the accumulation of capital, economic progress couldn't be made.

Of course, this does not mean that in the future, we won't discover a better way to exchange. Humanity and commerce are inseparable concepts.

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