A barter exchange system is one where goods and/or services are directly exchanged without money. For example, trading chickens for a newspaper subscription or offering free baking in exchange for manicures. Bartering predates currency and is still common in developing countries and still present on a small-scale in developed nations. Contrary to popular belief there is no record at any point in history of a society that exchanged solely through the barter system. This could be due to some of the problems with a barter system:
- Mutual Coincidence of Demand: People with complimentary goods or services need to be able to find one another and discover that they both need what the other possesses.
- Variations in Value: In a barter economy, there is no concrete value attached to goods or services- this makes their value unpredictable and subjective.
- Indivisibility of Goods: Some goods and services cannot be divided…
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