Final answer:
Bartering is the direct exchange of goods or services between two parties without the use of money. It requires a double coincidence of wants, making it inefficient for modern advanced economies. The introduction of money, a key feature of capitalism, allows for more efficient and widespread trade.
Step-by-step explanation:
The direct exchange of goods or services between parties in lieu of monetary payment is known as bartering. Bartering is a process where people exchange one form of goods or services for another, which predates the invention and use of money. In historical contexts and even in modern situations where money is scarce or not preferred, bartering is a way for individuals to obtain what they need or want. However, this system can be highly inefficient, especially in complex modern economies.
For bartering to work effectively, it requires a double coincidence of wants, meaning both parties involved need to have something the other wants. As a reflection of early economies, bartering was based on mutual needs and wants, but with the growth of societies and the division of labor, coordinating such trades became increasingly difficult. The introduction of money as a medium of exchange greatly improved efficiency by providing a universally accepted means of payment.
Within capitalism, an economic system characterized by private ownership and the production of goods for profit, money plays a fundamental role. It allows for quick, unencumbered market transactions free from the lengthy process of finding a perfect bartering match.