Correct option is B
Correct Answer: (B) Purchase and sale of goods in exchange for goods
Explanation:
The barter system is an old method of exchange where goods and services are traded directly for other goods and services without using money. This system was commonly used before the invention of currency and relied on mutual agreement between parties regarding the value of exchanged items.
Information Booster:
Limitations of the Barter System:
- Lack of a common measure of value – Difficult to determine the exact worth of exchanged goods.
- Double coincidence of wants – Both parties must need what the other offers.
- Difficulty in storing value – Perishable goods cannot be stored for long periods.
- Indivisibility of goods – Some items cannot be easily divided for smaller trades.
Transition to Money System:
- Due to these challenges, money was introduced as a universal medium of exchange, simplifying trade and economic transactions.
Additional Information:
- Purchase of goods in exchange for money: This describes a monetary economy, not a barter system.
- Sale of goods in exchange for money: This applies to modern economies with a currency-based system.
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