How Does a Barter System Work?

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.

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.