ECONOMICS 12th Grade Second Period

MONEY, BANKING & FINANCE

Definition: Money may be defined as anything that is generally acceptable as a medium

of exchange for making payments, settlement of debts or other business obligations.
Before the introduction of money, the type of exchange that took place was called trade-
by-barter.

TRADE BY BARTER
Definition: Trade by barter may be defined as the direct system and practice of
exchanging goods for goods and services for services.

PROBLEMS OR DIFFICULTIES OR DISADVANTAGES OF TRADE BY

BARTER
1. The Difficulty of Double Coincidence of Wants: That is, before exchange can take
place, one has to look for somebody who wants his commodity and at the same time
must have what he wants at that material time.
2. It Wastes Time and Energy: This is because, a person may use all his time going
about in the market looking for someone who has what he wants and at the same time
needs what he has.
3. Difficulty in Assessing the Value of Commodities: For instance, it is difficult to
determine how many tubers of yam will be equal to a basin of gari.
4. Exchange Becomes Uninteresting and Unexciting: When one considers the ordeal
one has to undergo in order to exchange one’s goods and services with others, the
interest and excitement one has for the exchange will disappear.
5. It Does Not Encourage Large Quantity and Variety Purchases: This is a result of
problem of assessment and the fact that one finds it even difficult in establishing double
coincidence of wants for a single commodity not to talk of many commodities.
6. It Does Not Encourage Deferred Payment: Deferred payment