Q.(a) State the constraints in Barter System.

(a) Barter fails due to no double coincidence of wants, no common measure of value, difficulty in storing value, indivisibility of goods, and difficulty in deferred payments. (b) A Bill of Lading is a document of title for goods carried on a general ship; a Charter Party is an agreement to hire a whole ship.

(a) Constraints (difficulties) in the Barter System

Barter means the direct exchange of goods for goods without using money — the earliest form of trade discussed in the evolution of commerce in the TN HSC Class-11 Commerce syllabus. Its constraints are:

1. Lack of double coincidence of wants — an exchange happens only when each party has exactly what the other wants at the same time, which is very hard to find.
2. Absence of a common measure of value — there is no single yardstick to fix how much of one good equals another, making fair pricing difficult.
3. Difficulty in storing wealth/value — wealth had to be kept in the form of goods, many of which are perishable and lose value over time.
4. Indivisibility of goods — some goods (like a cow or a house) cannot be divided into small parts to match the value of what is wanted in exchange.
5. Difficulty in deferred/future payments — lending, borrowing and future contracts are hard when there is no common unit to express and settle debts.

These difficulties led to the invention of money as a medium of exchange.

(b) Bill of Lading vs Charter Party