Barter system

Meaning:

The barter system is an ancient method of trade in which people exchange goods and services directly without the use of money. It is considered the oldest form of economic

transaction.

Example:

For instance, a farmer might trade a certain amount of wheat with a potter in exchange for pots. This trade relies on both parties having something the other desires, known as the “double coincidence of wants.”

How it worked:

Individuals exchanged goods they produced, such as food, clothing, or tools. The value of these goods was determined through mutual agreement between the parties involved. 

There was no use of coins or currency in these transactions, making the system reliant on  direct exchanges.

Why it stopped:

The barter system became impractical as it was increasingly difficult to  match needs between individuals. For example, if a farmer wanted cloth but the weaver did

not need wheat, no trade could take place. The absence of a common measure of value  complicated transactions, and as societies expanded, the logistics of carrying goods became  challenging.

Advantages:

It provides a simple and direct means of exchange.
Eliminates the need for money in transactions. Fosters cooperation and community relationships.

Disadvantages:

It is often challenging to find someone who wants exactly what you have to offer. There is no standard method to measure the value of goods being exchanged. It is difficult to save wealth or store goods for future use, making it unsuitable for larger economies.