Q.Mention any two problems of barter system of trade.
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Start your 14-day free trial to unlock the full solution →The barter system, which relies on the direct exchange of goods and services, fails primarily because it requires a double coincidence of wants and lacks a common unit of account — making trade inefficient and often impossible.
The barter system is the oldest form of trade, where people exchange goods or services directly for other goods or services — no money changes hands. At first glance, it sounds simple: you have rice, I have cloth, we swap. But in practice, it breaks down badly. Two fundamental problems stand out.
1. The double coincidence of wants. This is the most crippling flaw. For a trade to happen, each person must want exactly what the other has, at the same time. If you have rice and want cloth, you must find someone who has cloth and wants rice. That is a very narrow window. Most of the time, you will find someone who has cloth but wants fish, not rice — and the trade cannot happen. You end up spending more time searching for a trading partner than actually trading. In a modern economy with millions of goods, this search cost becomes impossibly high.
Do not confuse "double coincidence of wants" with simple mutual need. It is not just that both parties want something — it is that each party's surplus exactly matches the other's desire. That is far rarer.
2. Lack of a common unit of account. In a barter system, there is no standard way to express the value of things. How many kilograms of rice is a pair of shoes worth? That depends on who you ask, the season, the quality of the rice, the style of the shoes — every trade requires a separate negotiation over relative value. There is no single measure (like rupees) to compare the worth of different goods. This makes it impossible to store value or to plan ahead. If you save rice for future trade, it might rot, or its value might change drastically. You cannot easily compare the price of a cow with the price of a plough because there is no common denominator. …
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