Question

Describe two disadvantages of early forms of money, and explain how they could have been fixed.

Answer 1

The early system of money was the barter exchange system where the commodities were exchanged for other's commodities. The major disadvantages were:

1. Transportation

Some of the early forms of money were hard to transport. Limestone is heavy and thus would be hard to transport. Cattle are hard to transport mainly because they are animals. They have a mind of their own and it would be hard to get them to move.

2. Perishability

A lot of early money was perishable. Cattle could die if not tended to constantly. Shells could break and limestone might as well. Salt got ruined when wet. Grain and cocoa beans eventually wore out or spoiled.

Step-by-step explanation:

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Answer 2

The early system of money was the barter exchange system where the commodities were exchanged for other's commodities. The major disadvantages were:

1. Lack of Double Coincidence of Wants:

It is fundamental for an individual who wishes to exchange his good/service to locate some other individual who isn't just eager to purchase his good/service, yet in addition has that good which the former needs. This could be fixed if seller finds a buyer who has the same good that is needed so both exchange goods that the other needs.

2. Lack of a Common Measure of Value:

Regardless of whether the two people who need each other's merchandise meet unintentionally, the issue emerges with regards to the extent in which the two products ought to be traded. There being no basic proportion of significant worth, the rate of trade will be discretionary fixed by the power of interest for one another's merchandise. This could be fixed if both parties decide the goods they wish to trade.