Theory question 103
MoneyCommerce 2 (essay)
(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.
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(a) Any five: need for double coincidence of wants; difficulty of measuring value (no common unit/rate of exchange); indivisibility of some goods; difficulty of storing wealth (perishable goods); difficulty of deferred payment; difficulty of carrying bulky goods; limits specialisation.
(b) Any five, explained, matching (a): money is a medium of exchange, so no need to find someone with the opposite want; a unit of account/measure of value, so prices are easy to fix; money is divisible into small units; a store of value, so wealth can be kept; a standard of deferred payment, so credit is possible; money is portable; encourages specialisation and trade.
Match each solution in (b) to a problem in (a).