Discuss the problems associated with trade by barter. – NABTEB QUESTION

The problems associated with trade by barter include the following:

i. The problem of double coincidence of wants: it is not easy to establish double coincidence of wants upon which exchange is based.

ii. Time wastage: a lot of time is wasted before double coincidence of want is established.

iii. Difficulty in fixing the exchange rate: There was no standard exchange rage under the barter system of exchange thus there was multiple exchange rates.

iv. Production is limited: since the market is not predictable under barter, production is on a small scale.

v. Problem of indivisibility of goods: some goods are large and not divisible into smaller units. The problem of exchange arises when the large commodity is to be exchanged for smaller goods.

vi. Saving was impossible under barter since the goods were perishable and they may have gone bad before exchange could take place.

vii. The problem of deferred payment: Credit transaction was not possible under trade by barter.

viii. The problem of the bulkiness of some goods: If the commodity involved is heavy to be carried about it is difficult to establish double coincidence of wants.