Question

Describe four demerits of barter system.

Hint:

The barter system is inefficient due to the difficulty in matching wants and the absence of a common measure of value.

Answer 1

Step 1: Define the barter system.
A barter system is an old method of exchange where goods and services are traded directly for other goods and services, without using money.
Step 2: Demerits of the barter system.
- **Double Coincidence of Wants:** For a trade to occur, both parties must want what the other has. This makes exchanges difficult. - **Indivisibility of Goods:** Some goods cannot be divided into smaller units to facilitate trade, causing inefficiencies. - **Lack of a Standard Measure:** In barter, there is no common measure of value, making it hard to compare the worth of different goods. - **Difficulty in Storing Value:** Goods may not be easily stored or preserved for future use, unlike money, which acts as a store of value.
Step 3: Conclusion.
Thus, the barter system has several limitations that make it inefficient for facilitating trade in a modern economy. Final Answer: \[ \boxed{\text{The demerits of barter system are: Double Coincidence of Wants, Indivisibility of Goods, Lack of Standard Measure, and Difficulty in Storing Value.}} \]