If money is suddenly disappear, then the economy is drives to the – BARTER SYSTEM OF EXCHANGE : Barter system refer to that system where good and services are exchange for each other, for mutual satisfaction of wants.
Difficulties of BARTER SYSTEM :-
- Double Coincidence of wants
- No Common unit of values
- Indivisibility of Certain Goods
- Transfer of values
Double Coincidence of wants :- means that goods in possession of different individual must be useful and needed by each other. In other words, it implies that goods which an individual, A is willing to sell must be needed by other person B. Thus the act of sale and purchase of both A & B must coincide.
No common unit of values :- A barter economy is one with no common unit of value. Prices of goods must be quoted in term of each other. A buyer must might cost a book, etc.
Indivisibility of Certain Goods :- Certain Goods lose their utility if they are divided into parts. For example the values of a house may be equal to 2 goods and the owner of the house wants to buy one goods. Thus he is supposed to sacrifice half of his house. This sounds ridiculous.
Transfer of values :- From one to another is another difficulty of this system. Suppose a person wants to sell his house and go to another place. He will only gets goods and cattle in exchange for his house. Thus it would be difficult to transfer bulky goods from one place to another. Hence transfer of values is not possible.