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State with reasons whether you agree or disagree with the statements:

There are no difficulties in the barter system.

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No, I do not agree with the statement. A barter system is a process of exchange under which people exchange goods and services produced by them with goods and services produced by others. With the progress of civilization, human wants to be multiplied and the barter system of exchange became obsolete. This was because of various inherent limitations. 

They are as follows:

  • Lack of double coincidence of wants: Barter exchange cannot take place unless there is a double coincidence of wants. Under Barter System wants may not always coincide. 
  • Lack of common measure of value: In the Barter System, there was no common measuring unit of account, so it was difficult to calculate the value of goods to be exchanged. 
  • The problem of storage: There was the problem of storage under Barter exchange because most of the commodities exchanged were agricultural in nature. Such as rice, wheat, etc. which were perishable. 
  • The problem of divisibility: There was the problem of divisibility when it was a bulky commodity. E.g. exchange of rice and wheat with the horse was difficult.
  • The problem of making deferred payments: Future payment was not possible in the Barter exchange. Borrowing and lending were difficult.

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