Question

What is the ‘Barter System’? Mention one major drawback of this system.

Hint:

In economics questions, define the term clearly first and then mention one limitation or example to make the answer complete.

Answer 1

Concept: Before the invention of money, people exchanged goods and services directly. This early method of trade is known as the Barter System.
Explanation: The Barter System is a system of exchange in which goods and services are directly exchanged for other goods and services without the use of money.
For example, a farmer might exchange rice for clothes from a weaver instead of paying money.
One major drawback of the barter system is the lack of double coincidence of wants. This means that both parties must want what the other is offering at the same time. If this condition is not satisfied, exchange becomes difficult.
Thus, the barter system involves direct exchange of goods, but it suffers from the problem of double coincidence of wants.