Question

Short answer:

What is a barter? What factors made the barter inconvenient in the long run?

Answer 1

A barter is an exchange of goods and services for receiving goods and servies in return. A barter does not involve any money and was how people exchanged goods and services before money was introduced.

Following are the factors that made barter inconvenient in the long run-

• Coincidence of wants - It was not necessary that I will want to exchange product from the person who wants some of my goods or services.
• Divison of goods - If I wanted to buy 5 kgs of rice in exchange of a bullock cart, it will be impossible to divide the bullock cart to match the value of 5 kgs of rice.
• Lack of information - For the barter trade to be fair, I not only need to know the value of my goods and services but also of what I need to buy ; or I will end up giving high value goods or services for lower value goods or services
• Problem of deferred payments - It becomes difficult to make deferred payments as you cannot guarantee the availability and quality of a particular good in the future based on current assumptions.

Hence, the barter system had many flaws because of which it was replaced by money.