CBSE Class 12-commerce Macroeconomics Barter System and Evolution and Functions of Money

Learn about the Barter System and Evolution and Functions of Money from the CBSE Class 12 Commerce Economics chapter Money and Banking by referring to the revision notes, sample papers, past years’ papers etc. at TopperLearning.

Economic exchanges without the mediation of money are called barter exchanges. However, a barter system has other deficiencies. It is difficult to carry forward one’s wealth under the barter system. Suppose you have an endowment of rice which you do not wish to consume today entirely. You may regard this stock of surplus rice as an asset which you may wish to consume, or even sell off, for acquiring other commodities at some future date. But rice is a perishable item and cannot be stored beyond a certain period. Also, holding the stock of rice requires a lot of space. You may have to spend considerable time and resources looking for people with a demand for rice when you wish to exchange your stock for buying other commodities. This problem can be solved if you sell your rice for money. Money is not perishable and its storage costs are also considerably lower. It is also acceptable to anyone at any point of time. Thus, money can act as a store of value for individuals. Wealth can be stored in the form of money for future use.