Question

Which of the following explains why a barter system restricts trade and exchange?

(i) there must be coincidence of wants
(ii)the commodities used are not homogeneous
iii) it is difficult to divide certain commodities
iv) the rate of exchange must be determined
(a)ii and iv only
(b)iiand iv only
(c)i,ii,and iii
(d)i,ii, and iv

Answer 1

A barter system restricts trade because of the necessity for a coincidence of wants, lack of commodity homogeneity, and the difficulty in determining a rate of exchange. The correct answer to the provided options is (d) i, ii, and iv.

Step-by-step explanation:

The question asks about the limitations of a barter system and why it restricts trade and exchange. A barter system restricts trade because:

1. There must be a coincidence of wants between the two trading parties, meaning each party must have what the other desires.
2. The commodities used in trade are not homogeneous; this lack of standardization makes trades more complex and less likely to occur.
3. It is often difficult to divide certain commodities for trade purposes.
4. The rate of exchange must be determined, which can be challenging without a common measure.

Given these reasons, the correct answer to the question is (d) i, ii, and iv. These points impede the smooth functioning of a barter economy and show the necessity of a standardized medium of exchange, such as money, to facilitate trade.The correct option is (d) i, ii, and iv.