Characteristics of barter trade

  

Date Posted: 11/21/2012 12:09:44 AM

Posted By: saucer  Membership Level: Gold  Total Points: 4885

---

Barter trade was used in the old days where communities traded among each other. They did not have money back then. Barter trade refers to the exchange of goods and services for other goods and services. Money is not the medium of exchange in this trade.

Barter trade has the following advantages.

1) The communities did not have any other method of trading when barter trade was started. There was no money to be used as a medium of exchange. Therefore, barter trade provided communities with a way of trading among each other. They were able to exchange commodities via barter trade.

2) Barter trade has improved the standards of living of the trading communities. They exchange goods through barter trade. Through this exchange they get goods that they do not have. They acquire goods that can make their lives better. This in-turn improves their living standards.

3) Social relations are improved through trade. When the communities trade they interact. This will lead to a good relationship between them. There will be a peaceful coexistence among them. They must have a good relation to keep trading.

4) Communities could learn from each other when trading. Communities did not speak the same language. They had to find ways to understand each other. This led to the development of a common language. This improved trade and communication of the trading communities.

5) Goods could easily be compared physically. The ratio by which a good could be exchanged for another was determined by size. This reduced cheating and fraud cases. Goods could be compared and valued to determine an exchange rate. The terms of exchange were clear and so there were minimum cases of fraud.

6) Barter trade encourages specialization. Communities specialize in production of goods and services. They trade and have to make sure that their good

are of the highest quality.

---

Next: The Financial Journey of Life
Previous: Functions of commercial banks in Kenya