MONEY
class 12 economics,
CBSE notes
Money is the basic necessity of all the economies. It is the
most important thing for all the economic system.
But, how the world worked when there was no money?
people used to exchange goods for goods which is known as
BARTER EXCHANGE.
BARTER EXCHANGE
A World where there is direct exchange of goods for goods.
But it only worked where there was DOUBLE COINCIDENCE
OF WANTS. Double Coincidence Of Wants means fulfillment
of mutual wants of both buyer and seller.
e.g., If a farmer wants to buy a shoe then he has to find a
shoemaker who wants to buy grains, which is hard.
So, there generates a lot of limitations of Barter Exchange:
LIMITATIONS OF BARTER EXCHANGE
Lack of Double Coincidence of Wants: It only works
when both the seller and buyer are ready to exchange
each other’s goods.
Lack of Common Measure of Value: All the
commodities in barter system are not of equal value so
, it become hard to express the into one common
measurement or unit.
Lack of Standard of Deferred Payment: Under barter
system future payments and credit transactions cannot
take place with because at the time of repayment it
becomes hard to find the exact quality of goods to
return.
Lack of Store of Value: Storing goods like Grains and
Pulses for a long time was not possible.
To overcome this limitations of barter system money
was introduced. Money acts as a common measure of
value for all goods and services.
FEATURES OF MONEY
Medium of Exchange: Money acts as a medium of
exchange by which it removed the problem of double
coincidence of wants. Now a buyer can buy goods and a
seller can sell goods directly through money.
Measure of Value: Money acts as a common unit for all
goods and services. It becomes easier to compare the
prices of any good to any other good.
Standard of Deferred Payment: It was hard to repay the
exact amount at the time of repayment in barter system
but with money the amount can be easily transfer.
Store of Value: Goods cannot be stored for a long
period of time but money can be store as lang as we
want it to because of its general acceptability.
class 12 economics,
CBSE notes
Money is the basic necessity of all the economies. It is the
most important thing for all the economic system.
But, how the world worked when there was no money?
people used to exchange goods for goods which is known as
BARTER EXCHANGE.
BARTER EXCHANGE
A World where there is direct exchange of goods for goods.
But it only worked where there was DOUBLE COINCIDENCE
OF WANTS. Double Coincidence Of Wants means fulfillment
of mutual wants of both buyer and seller.
e.g., If a farmer wants to buy a shoe then he has to find a
shoemaker who wants to buy grains, which is hard.
So, there generates a lot of limitations of Barter Exchange:
LIMITATIONS OF BARTER EXCHANGE
Lack of Double Coincidence of Wants: It only works
when both the seller and buyer are ready to exchange
each other’s goods.
Lack of Common Measure of Value: All the
commodities in barter system are not of equal value so
, it become hard to express the into one common
measurement or unit.
Lack of Standard of Deferred Payment: Under barter
system future payments and credit transactions cannot
take place with because at the time of repayment it
becomes hard to find the exact quality of goods to
return.
Lack of Store of Value: Storing goods like Grains and
Pulses for a long time was not possible.
To overcome this limitations of barter system money
was introduced. Money acts as a common measure of
value for all goods and services.
FEATURES OF MONEY
Medium of Exchange: Money acts as a medium of
exchange by which it removed the problem of double
coincidence of wants. Now a buyer can buy goods and a
seller can sell goods directly through money.
Measure of Value: Money acts as a common unit for all
goods and services. It becomes easier to compare the
prices of any good to any other good.
Standard of Deferred Payment: It was hard to repay the
exact amount at the time of repayment in barter system
but with money the amount can be easily transfer.
Store of Value: Goods cannot be stored for a long
period of time but money can be store as lang as we
want it to because of its general acceptability.
