(a) State five problems of barter system of trading
(b) Explain five ways in which the introduction of money has solved the problems stated in 3 (a) above.
Explanation
(a) Problems of Barter
(i) Double coincidence of wants: The two parties in the exchange must need what each has
(ii) Inaccurate valuation of items of exchange: There is a problem of calculating the value of the goods.
(iii) Transportation of goods: The ned to move heavy goods for exchange purpose creates a lot of problems.
(iv) Storing of wealth is difficult because they are all in goods which could get damaged when not in use
(v) There is no form of credit because goods have to be physically exchanged at the point of transaction.
(vi) There is no unit of account as a result no standard numerical unit of measurement of the market value of goods and services.
(vi) Waste of time and energy: This is because of the delay experienced during the search for somebody to exchange with.
(b) The ways by which introduction of Money has solved the problem of barter.
(i) Double Coincidence of wants: With money you can sell what you have and Use the money to buy what you want thus eliminating double coincidence of wants.
(ii) Valuation of items - with - the introduction of money, goods can be priced at market prevailing rate.
(iii) The need to transport items to location for exchange is removed as the owner of goods could sell them anywhere and use the money to buy something else that he/she might need/ Convenience in carrying money around portability of money.
(iv) Storing of wealth: - Money unlike other commodities can he kept for a long period without deterioration.
(v) With the introduction of money, one can now buy on credit with a promise to pay later.
(vi) The introduction of money has made it possible to measure peoples properties and value of goods and services.