Distinguish between the barter system and the monetary system and give a justification for why monetary systems are preferred.
The main difference
between barter and monetary systems is that in
monetary system uses an agreed-upon form of paper or coin money acts as an medium of exchange whereas in barter
system exchange of goods takes place , when double coincidence of wants is
possible.
Monetary systems are preferred over barter system because:
1) No double coincidence of
wants required in monetary system .
2)
Measure
of value is possible in monetary system , that is we can measure each and every
good in terms of money which is not possible in barter system.
3) it is very easy to
store money with monetary system, which is not possible in barter system.
4) Money can be
transferred easily from one place to another which is not possible in barter
system.
5) Deferred payment (that
is purchasing goods now and paying for it later in future ) is possible in
monetary system, but in case of barter
system the exchange takes place at the
same time
The main difference between barter and monetary systems is that in monetary system uses an agreed-upon form of paper or coin money acts as an medium of exchange whereas in barter system exchange of goods takes place , when double coincidence of wants is possible.
Monetary systems are preferred over barter system because:
1) No double coincidence of wants required in monetary system .
2) Measure of value is possible in monetary system , that is we can measure each and every good in terms of money which is not possible in barter system.
3) it is very easy to store money with monetary system, which is not possible in barter system.
4) Money can be transferred easily from one place to another which is not possible in barter system.
5) Deferred payment (that is purchasing goods now and paying for it later in future ) is possible in monetary system, but in case of barter system the exchange takes place at the same time
