BARTER SYSTEM AND EVOLUTION OF MONEY

1. BARTER SYSTEM AND EVOLUTION OF MONEY `

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

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

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

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

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

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

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

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

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

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

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

13. 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.

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

15. 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.

16. 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.

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

18. FUNCTIONS OF MONEY Primary Functions Medium of Exchange Measure of Value

19. FUNCTIONS OF MONEY 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

20. FUNCTIONS OF MONEY 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

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

22. FUNCTIONS OF MONEY 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

23. FUNCTIONS OF MONEY 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

24. FUNCTIONS OF MONEY 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