Q:

How does a barter system work?

A:

Quick Answer

A barter system is an old system which involves exchanging goods and services for other goods and services. This system works effectively in situations where there is no a common measure of value to be used in trade.

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Full Answer

This system of trade allows people to get products that they don't produce. It allows flexibility in trade because related goods can be exchanged easily. A person can also offer a service to get a desired product. For example, a person can repair a bicycle in exchange for earphones. However, it also has limitations because it requires double coincidence of wants. It is also hard to store perishable goods for future trade.

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