Which of the following is the downside of the barter system of exchange?

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Difficulty in the valuation of goods.

Difficulty in dividing goods

Lack of double coincidence of wants

All of the above

answer is D.

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Detailed Solution

Difficulty in the valuation of goods, difficulty in dividing goods and lack of double coincidence of wants are the reasons for the downside of the barter system of exchange.
In ancient times, a barter system of exchange was used within local communities through which people directly exchanged goods and services with each other. For example, a farmer with milk and eggs can trade them for cake and bread from a baker. However, this system suffered from several downsides.
1)      The goods were limited, and it was also impossible to divide goods. Exchange of goods was only possible for one, two, or more.
2)      There was no method for the valuation of goods and services. Today, everything has some value expressed in terms of money.
3)      It was quite difficult to find a double coincidence of wants and needs, as needs differentiate from man to man.

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