Bartering was the earliest type of trade.
Further Explanation:
Barter system was one of the earliest forms of trade. It was the direct method of trade and the exchange of goods and services. This system was prominent when money was not invented. In this system, people exchange goods or services for other goods or services without using any medium of exchange like money. The Economists distinguishes barter system from the gift economies. It is an immediate reciprocal exchange method with no delay in time. It takes place on a bilateral and multilateral basis. In many developed countries, this system existed parallel to the monetary system for a limited extent. This method is generally adopted when the currency becomes unstable. The famous economists Adam Smith saw the inefficiency of the barter system. He explains the efficiency of using money in the exchange system. Adam Smith, father of Economics shows that markets pre-existed. So money was not created by the government. Slowly markets emerged out of the division of labor. Individuals specialize in certain specific crafts. So they thought we need to depend on the other subsistence goods. The goods were exchanged by barter. This system created “double coincidence of wants”. Craftsman started stockpiling with good, metal and no one refused. Then very late money was developed which was used as the medium of exchange.
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Answer Details:
Grade: High School
Chapter: Trade in Ancient Times
Subject: Social Science
Keywords:
Reciprocal exchange, currency, Adam Smith, money, double coincidence of wants.
