BARTER SYSTEM IN MODERN TIMES EXPLAINED IN DETAILS
Although barter system is not common nowadays, to some extent is applied mostly in international transactions whereby countries opt to exchange goods for goods in some situations. Also such system is still prevailing in very backward societies especially those found in third world countries where people are forced to exchange goods to goods due to low level of development.
EXCHANGE BY MONEY
Exchange by money is the exchange of goods through the use of money.
-Money is anything which is generally acceptable as a medium of exchange and acts at the same time as a measure of value and store of value.
-The most popular forms of money include metal coins and currency notes issued by the central bank.
FUNCTIONS OF MONEY
– A medium of exchange which does not require a double coincidence of wants
-A unit of account which enables prices to be quoted in monetary unit and preparation of accounts
-Measure of value for quick comparison of relative values of goods and services.
–Store of value (wealth) which enables people to purchase commodities at convenient time in future.
–Standard of deferred payment where the money facilitates payment of transactions and debts in future.
–It encourages specialization by easing trading.
FEATURES OF GOOD MONEY
– Generally acceptable in society,
-Easy to transport (portable),
-Divisible to smaller denominations,
–Durable if it is to store values well,
–Scarce,
–Homogeneous i.e. denominations of equal value should be uniform,
–Stable in value.
FACTORS PLAYED IMPORTANT ROLE IN THE GROWTH OF COMMERCE IN THE WORLD
Generally, the following factors have contributed to the growth of commerce in the world;
1) DIVERSIFICATION OF NATURAL RESOURCES
Some countries have various natural resources such as arable land suitable to produce crops while other countries are having other different natural resources like minerals, this highly encourage the exchange of such natural products among various countries. For example Tanzania which is very rich in Tanzanite minerals exports them to Arabic countries which are so rich in oil, from them Tanzania imports oil.
2) DIFFERENCES IN HUMAN KNOWLEDGE AND SKILLS
People in various countries have different knowledge and skills, such differences lead to production of products of different kinds hence a need to exchange them among the countries. For instance Japanese are skillful in manufacturing electronic products while Tanzanians are very skilled in making of traditional baskets, therefore Tanzanians and Japanese have to export and import them for both citizens to benefit.
3) DIFFERENCES IN HUMAN NEEDS AND WANTS
Citizens of different countries have different needs and wants; this induces the exchange of needs and wants among them. For example Arabians are very found of coffee while Tanzanians are so found of cellular phones, therefore Tanzanians have to import cellular phones from Arabian countries and Arabians have to import coffee from Tanzania
4) SPECIALIZATION OR DIVISION OF LABOUR
Countries do specialize in production of commodities which can earn them big returns and incur less cost and abandon the production of commodities which are not beneficial, therefore the countries have exchange the specialized products to enjoy potential economic returns.