` BARTER SYSTEM AND EVOLUTION OF MONEY

CONTENTS Barter System Benefits of Barter System Difficulties in Barter System Development of Money Money Functions of Money

In ancient days, man’s wants were very few. BARTER SYSTEM In ancient days, man’s wants were very few.

BARTER SYSTEM As time Passed, his wants multiplied and his self-sufficiency disappeared.

BARTER SYSTEM He began to exchange some of the things he produced for those which neighbours possessed.

BARTER SYSTEM Such direct exchanges of goods or services, without the use of money, are called Barter.

BENEFITS OF BARTER SYSTEM It is the simplest form of exchange.

BENEFITS OF BARTER SYSTEM It plays a valuable role in maintaining harmonious relationship among the members of the community.

BENEFITS OF BARTER SYSTEM Barter ensures need based production as under this system, only those goods are produced that are required by the community.

DIFFICULTIES IN BARTER SYSTEM I have banana to exchange with apple. Lack of Double coincidence of wants. But I want rice.

DIFFICULTIES IN BARTER SYSTEM Lack of Double coincidence of wants. Lack of common measure of value.

DIFFICULTIES IN BARTER SYSTEM Lack of Double coincidence of wants. Lack of common measure of value. Difficulty in transportation of commodities.

DIFFICULTIES IN BARTER SYSTEM Lack of Double coincidence of wants. Lack of common measure of value. Difficulty in transportation of commodities. Capital or wealth cannot be stored as goods lack durability.

Today, we cannot think of life without money. DEVELOPMENT OF MONEY ` ` ` ` ` ` ` ` ` ` ` ` ` ` ` Today, we cannot think of life without money.

DEVELOPMENT OF MONEY Animal Skin Metal Coin Grains Paper Money Different commodities, varying with the conditions of time and place have served as money, with varying successes.

MONEY ` ` ` ` ` ` ` Anything that is generally acceptable as a means of exchange and that at the same time acts a measure and as a store of value is Money.

MONEY Money = Metallic Money Metallic Money + Legal Tender Money + Credit Instruments Credit Instruments

FUNCTIONS OF MONEY Primary Functions Medium of Exchange Measure of Value

FUNCTIONS OF MONEY Primary Functions Medium of Exchange In the modern exchange system money acts as the intermediary in sales and purchases. The prices of goods and services are expressed in terms of money. Primary Functions Medium of Exchange Measure of Value

FUNCTIONS OF MONEY Primary Functions Measure of Value All goods and services are valued in money. Thus, we can say how much of one commodity is equal to how much of another commodity. Primary Functions Medium of Exchange Measure of Value

FUNCTIONS OF MONEY Secondary Functions Store of Value Transfer of Value Standard of Deferred Payment

FUNCTIONS OF MONEY Secondary Functions Store of Value Savings are done in terms of money which is more permanent than commodity. Capital formation, which is an essential condition of economic growth, has become possible with the invention of money. Secondary Functions Store of Value Transfer of Value Standard of Deferred Payment

FUNCTIONS OF MONEY Secondary Functions Transfer of Value Due to the general acceptability of money, purchasing power can be transferred from one person to another from place to place and time to time. Secondary Functions Store of Value Transfer of Value Standard of Deferred Payment

FUNCTIONS OF MONEY Secondary Functions Standard of Deferred Payment Since value of money is more stable in comparison to other commodities, money now acts as the standard of deferred payments. Secondary Functions Store of Value Transfer of Value Standard of Deferred Payment 2003 2004 2005 2006