Barter system

Meaning:

The barter system is a method of trade where people exchange goods and services directly without using money. It is one of the oldest forms of trade.

Example:

A farmer might trade wheat with a potter for pots. This exchange works only if both people want what the other has, which is known as the “double coincidence of wants.”

How it worked:

People exchanged goods they produced, like food, clothes, or tools. The value of goods was decided through mutual agreement between the traders. There was no currency or coins involved in these transactions.

Why it stopped:

The barter system became less effective because it was challenging to match  needs.  For instance, if a farmer wanted cloth but the weaver didn’t need wheat, no trade could  occur. Additionally, as societies grew, it became difficult to carry goods everywhere.

Advantages:

Simple and direct exchange system. Builds cooperation and relationships in small communities.

Disadvantages:

Difficult to find someone who wants exactly what you offer.
No standard way to measure the value of goods.