Question

Which one of the following is the difficulty of Barter system?

• A. Lack of double coincidence
• B. Difficulty in division of the goods
• C. Lack of general acceptable measure of value
• D. All of these

Hint:

The main problems with barter are the "three lacks": lack of double coincidence of wants, lack of a common measure of value, and lack of a store of value (and difficulty of division).

Answer 1

The Correct Option is D

The barter system, which involves the direct exchange of goods and services without using money, suffers from several major difficulties that make it inefficient for a modern economy:

(A) Lack of double coincidence of wants: For a trade to occur, one person must have what the other wants, and vice versa. Finding such a match is often difficult and time-consuming.
(B) Difficulty in division of the goods: Many goods are indivisible. For example, one cannot divide a live animal into smaller parts to trade for multiple smaller items without destroying its value.
(C) Lack of general acceptable measure of value: Without money, it is hard to determine the value of goods. The price of every good would have to be expressed in terms of every other good, leading to a huge number of exchange ratios.
All these issues are significant drawbacks of the barter system, which led to the invention of money.