It is a primitive type of economic system in which goods and services are exchanged without any common medium of exchange. In the barter system there is no use of money. The goods and goods, gods and services and services and services are exchanges without the use of money. In this type of system there is lack of commercial production accumulation of wealth, store of values and so on. The exchange is possible only if there is double coincidence of wants. The exchange rate is determined by the exchangers, there is no common market place. The nature of economy is subsistent. It generally flourishes among uncivilized and backward communities. It is now used in the modern foreign trade because of having good impact on balance of payment of trading countries.
Features of barter system
- Barter system is only possible if there s double coincidence of wants.
- There is no use of money. It means there is lack of common medium of exchange
- There is absence of common place for exchange
- The economy is subsistent in nature. They are not produced to earn money but only to fulfill household needs
- There is no store of value of goods and services. Most of goods are perishable and services are not storable.
- There is o production of varieties of goods and services. Production is traditional and there is no diversification in occupation and knowledge too.
- There is lack of divisibility of goods
- There is lack f deferred payment. During repayment only principle is paid.