Money is something that is generally accepted as a medium of exchange. Its main aim is to facilitate the exchange of goods and run.
in advance money came into use, exchange of goods and services took place through transaction system. job system implies the direct exchange of goods for goods. Such an economy is called C-C economy i.e., commodity for commodity exchange economy. In such an economy, the trading costs are
1) search cost
2) cost of waiting i.e., disutility of waiting
Drawbacks of handicraft system
1) Lack of double coincidence of wants: The simultaneous fulfillment of usual wants by buyers and sellers is known as double coincidence of wants. concern system requires double coincidence of wants. If A possesses a frighten and wants exchange it for a horse, he has to find a mortal who cannot only spare a horse but in any case wants a cow.
2) Lack of common measure of value: It relates to the absence seizure of a common unit in terms of which venture the value the goods and services. In what proportion the goods are to be exchange depends upon the necessities of the two parties in which case one party may be bound to suffer. This problem is aggravated if the commodity touch is indivisible.
3) Lack of standard of deferred payments: Barter system lacks any qualified unit to engage in contracts that involve afterlife payments. In a barter economy, future payments would have to be stated in terms of goods or services. This could lead to the following problems:
a) there could be disagreement regarding which specific commodity would be use for repayments.
b) there could be disagreement regarding quality of goods or services to be repaid.
c) the commodity to be repaid would increase or precipitate in its market value.
4) Lack of store of value: Barter system does not provide for any method of storing generalized purchasing power. People cannot store purchasing power for future use due to problems such as costly storage, derogation in...If you want to get a full essay, order it on our website: Ordercustompaper.com
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