Berbice Educational Institute

Business Education Department

Subject: Business Education

Grade 10

Section 1: The Nature of Business

Handout #1

Topic: The development of barber

Subtopic: Barter:

What is meant by barter?

Barter is a method of exchange in which one good or service is exchanged for another; no money is
used.

Advantages of barter:

1. Bartering allowed farmers and hunters to dispose of any surpluses that they had and in

exchange obtain a wider range of goods that they could not have produced themselves.

2. Most of the needs of the community were met through barter, even in early societies, people

were able to specialize, knowing that they might be able to swap any surplus they had with

other people who had produced too many of other goods.

3. Trade in this form also allowed for increased output, since individuals were able to specialize in

one area of work/ production. When individuals specialize in one area of work/ production they

are able to concentrate on what they are best at, further developing their skills in that area.

Disadvantages of barter:

1. Double coincidence of wants: this is considered to be one of the major problems associated with

the barter system. In barter, person A has to find someone else, person B, who not only wants

what person A has to exchange but also possesses the very thing that person A wants to obtain!

This can be time consuming. In practice, achieving this double coincidence of wants rarely

occurred.
 2. No exchange rate: even when the double coincidence of wants was met, the two traders had to

agree on what quantities of good X to exchange for good Y. As money did not exist or was not

being used, no monetary prices could be set, so the two traders had to agree, for example, how

many rabbit skins to exchange for one bag of corn.

3. In barter, most goods are not divisible, so it may be impossible for the exchange process to take

place. For example, if a boat is thought to be worth six bags of corn, and the farmer only has

three bags of corn, one half of a boat is of no use to him! Hence the transaction cannot be

completed, since the farmer is unable to purchase the entire boat.

4. With barter exchange, many goods obtained through trade will be perishable, so goods cannot

be stored as wealth for long.

Topic 2: The role of money

Subtopic: Brief history from subsistence economy to money economy.

Barter system: Trading stones, gems and precious stones

The development of money: notes and coins (paper money).

The introduction of debt cards

The introduction of credit cards.

The introduction of online shopping

Figure 1: Subsistence economy to money economy.

The barter system was a system of exchange, used in early societies to facilitate trade. Barter was a very

common form of trade in societies before a system of money was widely adopted, this system of

exchange allowed individuals to exchange goods and services without the use of money. However,

there were many problems associated with the barter system, one major problem was known as ‘double

coincidence of wants’, whereby individual traders found it difficult to find individuals to trade with who

had the exact items that they were looking for and in return these traders must possess exactly what
these individuals were looking to trade also. The problems that were associated with the barter system

led to the introduction of a medium of exchange that made trading easier among comminutes. With the

introduction of paper money (notes and coins) individual traders were able to establish an exchange

rate where by monetary prices were set, enabling traders to pay a predetermined sum of money for

goods and services bought. However, there were many problems associated with carrying around larger

sums of money. These problems included robbery, misplacement of currency when traveling, etc. As a

result, the introduction of debt cards sought to eliminate most of the problems associated with

individuals carrying large sums of cash. Debt cards provide a safe and reliable way of conducting

business transactions, without individuals having to carry around large sums of cash. IT further enabled

individuals to make purchases easier, with just one swipe of their debt cards. Using a debit card is not

considered to be the safest way of conducting transactions via the internet. With the introduction of

credit cards individuals can safely shop from the comfort of their homes. Credit cards allow their users

to cancel transactions that they may consider to by fraudulent or scams with just one click of a mouse

when compared to the use of debt cards. Lastly, credit cards enable their users to buy and sell items

using the World Wide Web as a result of globalization and advancements in e-commerce and

international trade.

Topic #3: Instruments of exchange/ payments

a) The following are a list of instruments associated with exchange/ payments:
1. Barter
2. Bills of exchange
3. Electronic transfers
4. Tele-banking and e-commerce
5. Cheques
6. Money order
7. Debit cards
8. Credit cards
9. Bank draft
10. Telegraphy money transfers
11. Bank transfers
12. M-money/mobile money and mobile wallets.

b) Interpretation and significance of information on instruments of payments.

1. Barter: is a method of exchange in which one good or service is exchanged for another; no

money is used.

2. Bills of exchange: a payment method used in international trade that allows the importer a

period of credit.

3. Electronic transfers: is the transfer of money from one bank account to another, either within a

single financial institution or across multiple institutions, via computer-based systems, without

direct intervention of bank staff.

4. Tele-banking and e-commence: are both ways of conducting business over the internet.

Telebanking involves moving money from account to account and place to place over the

internet, while e-commerce involves the exchange of goods and services over the internet. Sites

such as Amazon or eBay engage in e-commerce.

5. Cheque: a written instruction to a bank to transfer a certain sum to the account of the payee

(the individual being paid).

6. Money order: a guaranteed instrument for making payment issued by banks or post offices.

7. Debit card: issued by banks or credit unions to account holders to allow them to make

immediate payments for purchases, by transferring money from the account holder’s account to

that of the trader.

8. Credit card: issued by banks and other financial institutions to account holders to enable them

to buy goods from traders. If payment to the bank is made within an agreed period-up to seven

weeks- it is interest-free, but after the ‘free’ period interest is added.

9. Bank draft: a cheque drawn on the bank itself. A bank draft is drawn on one bank and paid to

another bank or branch. They can be requested by a customer of a bank when the customer has
 to pay a specified sum of money to a known payee and the personal cheque would not be

acceptable. In other words if an account holder of a given bank has to make a payment to

another individual but that person does not trust that person to make the payment, may be

because of the person’s bad character then the account holder may request his/her bank to

make the payment on his/her behave, instead of drawing up a personal cheque that may not be

accepted by the payee.

10. Telegraphic money transfer: an electronic means of transferring money from one bank account

to another usually overseas.

11. Bank transfer: is when money is sent from one bank account to another, transferring money

from your bank account is usually fast, free and safer than withdrawing and paying in cash. This

process is made possible by the direct intervention of bank staff.

12. M-money/mobile money and money wallet: M-money/ mobile money is a way to store and

manage money in an account linked to a mobile phone, similar to a bank account. Mobile

money users can send money to other people, pay bills, and purchase many items, including

mobile airtime (also known as mobile recharge) which is used to make calls, send SMS. Or use

data.

Assigned tasks

a. Explain what is meant by ‘double coincidence of wants’.

b. Students are required to state the differences between globalization, e-commerce and international
trade.

c. In your own words explain what is meant by bank draft.

d. Paste pictures of the instruments of exchange/payments in your Business Studies books. (Small

pictures, you don’t have to send this to Ms. Griffith). After completing the assigned tasks please

forward your answers directly.