Advantages of Barter System

Advantages of Barter System

Advantages of barter system can be explained in terms of inflation, income distribution an economic stability, artificial shortages, and excess production; these concepts or advantages have been explained below;

1.    No Inflation

Inflation is a phenomenon of increasing prices or decreasing the money value. This phenomenon is only relevant in monetary system. In barter system there is no concept of inflation (Continue rise in price).

2.    Equal Income Distribution

Second advantage of barter system is equal distribution of income or little gap in income distribution.  Barter system based on immediate utilization of goods and therefore there in no concept of rich and poor.

3.    Economic Stability

In barter system there is always economic stability, and there are no trade cycles i.e. (boom, decline, depression, recovery). In barter system economy moves in a smooth & stable manner.

4.    No Artificial Shortages

In barter system there is no price mechanism, and therefore artificial shortages of goods are not created for increase in prices of goods. It means that barter system may be term as more fair system than monetary system.

5.    No Excess Production

In barter system goods are produces strictly in accordance of demand, and there is no concept of excess production, because excess production may result in full loss due to lack of storage facilities of goods (Goods can store value only for limited time).