Barter

In an early textbook on’ money. when Stanley Johnson wanted to illustrate the tremendous leap forward that occurred as societies introduced money. he used the following experience.

When counted. her share was found to consist of three pigs. twenty.three turkeys. forty-four chickens. five thousand coconuts, besides considerable quantities of bananas, lemons, and oranges Paris this amount of live stock and vegetables might’ have brought four thousand francs. which would have been good remuneration for five songs. In the Society Islands. however, pieces of money were scarce; and as Mademoiselle could not consume any considerable portion of the ‘receipts herself. it became necessary in the mean time to feed the pigs and poultry with the fruit,through barter contrasts with exchange through because pigs, turkeys, and lemons are not generally acceptable monies that we or Mademoiselle can use for buying things. Although barter is better than no trade at all, it operates ‘under grave disadvantages”because an elaborate division of labor would be unthinkable without the’ introduction of the great invention of money.

As economies develop, people no longer barter one good for another. Instead, they sell goods for money and then use money to buy other goods they wish to have. At first glance this seems to complicate rather than simplify matters, as it replaces one transaction with two. If you have apples and want nuts would. it not be simpler to sated one for the other rather than to sell the apples for money and then use the money to buy nuts?

Actually, the reverse is true: two monetary transactions are simpler than one barter transaction example, some people may want to buy apples, some may want to sell nuts. But it would be a most but consensual circumstance to find a person whose desires exactly complement your’ own-eager to sell- nuts vandal
buy apples. use a classical economic phrase, instead of there being a “double coincidence wide wants,” there is likely to be a “want of coincidence.” So, unless a hungry tailor happens to find an draped farmer who has both food and a desire for counter repairer’ of pants, under barter neither can make a indirect trade. ‘Societies that-traded extensively simply could overcome the overwhelming handicaps of barter. The use of a commonly accepted medium of change, money, permits the farmer to buy pants from the tailor, who buys shoes from the cobbler, who buys thereat from the farmer.

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