Characteristics of Barter System

Characteristics of Barter System

Barter system goods can be exchanged against good and there is no involvement of money in such system. Barter system is old & out dated system and currently there is no effective existence of this system.

1.    No Role of Money

In barter system, money does not play any role and such system works without money. In old days, when there was no concept of money, barter system was the only option for trade. This system became obsolete on introduction of money.

2.    Goods Exchanged for Goods

In barter system goods were exchanged against good, keeping in view modern money in mind, we can say that goods were used as money.

3.    Intensity of Want & Negotiation

Barter system is based on the intensity of want for a good and negotiation between two parties for exchange of goods. Barter system does not support the proper market concept of free economy.

4.    Limited & Essential Goods Concept

Barter system only supports the production of limited and essential goods, which can easily be exchanged with other goods. There is no effective market for non essential or luxury goods.

5.    Effective for Limited Population

Barter system is only effective for limited population, where people know the need of other and producing the required goods according demand. Barter system does not support large production, and people would produce the goods which can be exchanged.

6.    Stability in Economy

Stability in the economy is one of the important characteristics of barter system. There is no artificial shortage and inflation in the barter system. In barter system demand & supply does not depends on the prices and therefore it function in stable and smooth way.