The Barter System Or Trade By Barter: Meaning, Problems Or Disadvantages Of Trade By Barter (Barter System)

Definition Of Barter System (Trade By Barter

The barter system also called trade by barter maybe defined as a form of trading in which goods are exchanged directly for tother goods with the use of money as a medium of exhange.

Problems Or Disadvantages Of Trade By Barter (Barter System)

1. Problem Of Double Coincidence Of Wants:

This involves looking for someone who is in need of what you have and at the same time, he wants what you have too. This result to a very serious problem.

2. No Fixed Rate Of Exchange:

This is the problem of exchange rate determination between two products, different rate on every transaction before it can take place. E.g how much of garri will exchange for beans.

3. Difficulty In Storing Wealth:

The barter system, unlike money, does not encourage store of wealth-value especially where perishable goods like yam and fresh tomatoes are involved.

4. Problem Of Indivisibility:

Many goods cannot be divided into small convenient because they are heavy and indivisible, So it does not encourage divisibility.