Properties of Barter System
Barter
system is out dated concept and is rarely used in modern world. Barter system
was used before introduction of money. Under barter system goods were exchanged
for goods, and there was no involvement of money.
1. No Money Involved
In
barter system there was no role of money. Barter system operated without money.
Barter system was the only option available, because no money existed in old
times. Therefore barter system was not a choice, rather a compulsion.
2. Goods are used
In
barter system goods were used to perform the function of money. Transaction was
used to perform by using value of goods. In simple term goods were used in
place of modern money i.e. currency notes & coins.
3. Intensity of Want & Negotiation
Barter system is based on the intensity of
want for a good and negotiation between two parties for exchange of goods.
Barter system does not support the proper market concept of free economy.
4. Limited Goods Concept
Barter
system is only valid for the limited goods, where the value of goods can be
measured in relation to other goods, but in the modern world, where there are a
lot of goods, barter system will not work.
5. Limited Population Concept
Barter system was a limited population
concept, where there are limited producer and limited user and exact demand can
be determined, because barter system does not support large scale production
and believes that there is only limited demand for product and goods should
produce up to that demand.
6. Stable Economy
Barter
system ensures stability of economy, there is no artificial shortage and
inflation in the barter system. In barter system demand & supply does not
depends on the prices and therefore it function in stable and smooth way.
