Limitations (Problems/Defects) of Barter trade
- It is not easy to establish the double coincidence of wants which satisfy both parties, that is, it is difficult to find one party who exactly has the commodity you want and who wants the commodity you have.
- It restricts the number of transactions that could take place in the economy. This limits trade in the economy.
- It is difficult to measure the relative value of one commodity in terms of another commodity under barter trade.
- It is difficult to store commodities for future exchange especially when the commodities are highly perishable for example tomatoes.
- There is lack of divisibility of some commodities during the exchange process e.g. a person who has a goat and wants maize faces this problem.
- Most of the commodities appear in plenty and therefore, they can easily lose value.
- It does not promote specialization and efficient allocation of resources. This is because there is no common medium of exchange acceptable to both consumers and producers.
- Some commodities are bulky and therefore, it becomes difficult to transport them from one place to another for exchange purposes.
CATEGORIES Economics
TAGS Dr. Bbosa Science
