what is barter system class 10

Barter system is an alternative method of trading where goods and services are exchanged directly for one another without using money as an intermediary. In a barter system, money is not used as a medium of exchange, rather one type of goods is exchanged for another type of goods. It is the oldest form of commerce, dating back to a time before hard currency even existed. Bartering is based on a simple concept: two individuals negotiate to determine the relative value of their goods and services and offer them to one another in an even exchange. A barter system is possible only when there is a situation of “double coincidence of wants”. i.e., when both parties are ready to exchange each other’s goods. For example, a farmer gives oil to a weaver in exchange for cloth. In a large economy, a barter system is not feasible due to the massive costs that will be incurred in order to find the right people to exchange their surpluses.