DEVELOPMENT

OF BARTER
What is barter?

It is where people
exchanged goods
and services for other
goods and services in
return, without the
use of money.
 Tangible and Intangible items are exchanged
Tangible: easily seen or recognized Intangible: something with no physical presence
that can't be touched, or is something that is vague
and capable of being touched and difficult to understand or value in concrete
Examples: terms.

Examples:
• Qualifications and experience of
employees
• Performance of songs and dances
• Trademarks and copyrights
• Advertising
• Software and designs
• Customer relationships
 History of Barter
During ancient times people were unable to buy goods from other
people with money. There was no money. They used barter. Barter
was the exchange of personal possessions for other goods that
people wanted. This kind of exchange started at the beginning of
humankind and is still used today. From 9,000-6,000 B.C., livestock
was often used as a unit of exchange. Later, as agriculture developed,
people used crops for barter. For example, I could ask another farmer
to trade a pound of peaches for a pound of bananas or apples.

Slowly the disadvantages of the system were realized and money

replaced barter.
 Advantages of Barter

The advantages of Barter System were Simplicity,

facilitates trade without the use of money, enables
disposal of surplus production, increases the
availability of goods and it lays the foundation for
the organized method of trading we have today.
• Simplicity
Barter system is very simple, without any
complications and suitable in International trade.

• Enables the disposal of surplus production

People were able to get rid of excess items while
obtaining a wider range of other items
• Increases the availability of goods
When people were able to specialize, it means that
they were able to produce more, therefore, the good
they produced was always available for exchanging.

• It lays the foundation for the organized

method of trading we enjoy nowadays.
Bartering is process and we use that process today in
exchange, only we use different forms of money.
 Disadvantages of Barter

The disadvantages of barter system were Lack of

Double Coincidence of wants, Lack of an equitable
exchange rate, Difficulty of Division and Sub - division
of Goods, Difficulty in calculating the value of goods,
Difficulty in the case of services and Difficulty in Strong
Value.
• The lack of double coincidence of wants:
Barter depends on the coincidence of wants. If you
have bananas and want to trade or barter them for
apples, you have to find someone who has apples
and is willing to trade them with bananas. This was
not always possible.

• Lack of an equitable exchange rate:

It was difficult for traders to agree on the quantities
of each other’s goods that were to be exchanged.
E.g. imagine having to decide how many pounds of
rice to exchange for one cow.
• Difficulties in dividing goods fairly / Lack of
divisibility
Some rates of exchange made it impossible to
trade because some goods could not be divided
into smaller parts. E.g. If 1 pound of rice was worth
half of a live chicken, then it would not be possible
to trade with 1 pound of rice because you cannot
have half of a chicken that is alive.
• It does not allow for wealth to be stored
over time / Difficulty in storing wealth

Many of the goods in the barter system could not

be saved for future use because they were
perishable. E.g. potatoes can only be kept for a very
short period of time after which they spoil. A cow
will live for a short number of years after which it
dies.