Class XI, Principles of Economics, "How Money Removed The Difficulties of Barter"

How Money Removed The Difficulties of Barter

With the help of money it has now become possible to over come the inconveniences of barter system.

1. Standard of Value

Under the system of exchange i.e. sales and purchase the value of each commodity is expressed in terms of standard of value such as gold or silver.

2. No need of Double Coincidence

Under monitory economy there is no such need of such two persons whose surplus suits with each other wants.

3. Sub-Division of Articles is Not Necessary

Money has solved the difficult of sub-divisibility of some of the commodities with out any loss. Under this system if any one needs urgent cash and has some valuable he can simply sell it in the market and get the desired money.

4. Store of Value

Money has provided man an opportunity to save money in the form of liquid cash that helps him to preserve his assets for a longer period of time and avoid any unseen stringencies.

5. Large-scale Production

Large scale of production is possible by the use of money, which was not possible under barter economy.

Summing Up

Thus money or sale and purchase system has removed all the difficulties of barter economy.