Money and Banking: Introduction

• As already mentioned the development of specialisation led to the development of trade people sought to satisfy their unmet needs and disposed the excess goods and services they had produced.
• This led to the development of barter trade.
• Barter trade was the most common form of trade before the development of money.
• Barter trade– is the exchange of goods and services for goods and services e.g. maize for a goat.

Problems of Barter Trade

• Requires a double coincidence of wants e.g. a person who wants maize and has a goat will have to find a person who wants a goat and has maize.
• As a result people had to travel long distances before meeting with anyone with whom they could make an exchange.
• Goods and services are difficult to divide into their relevant units for example goats cannot be divided into half-goats.
• Some goods are too heavy to carry over distances for example maize.
• Some goods are impossible to move for example land and houses requiring both parties to move to the location of the items and inspect and agree on them.
• Goods and services can be difficult to evaluate for example how many goats do you give in exchange for a cow?
• Perishables could be difficult to exchange as they could go bad quickly before the exchange could happen.

To access more topics go to the Commerce Notes page.