Bartering

What is Bartering?

Bartering is the trading of one good and service for another without using a medium of exchange such as money. A bartering Economy differs from a monetary economy in several ways. The primary difference is that goods and services are exchanged promptly and the exchange is reciprocal. The meaning is a fair trade with each party getting the thing they want or need in an amount to what they are Offering in exchange.

The Use of Bartering

Bartering is generally managed directly between two parties, but it may be done multilaterally through a trade exchange. Some countries usually don’t engage in barters unless they are done in conjunction with the standard monetary system of the country.

A barter system is often inaugurated as a means to continue the trading of goods and services that keeps a country functioning. This may occur if the physical money is not available or if the country witnesses hyperinflation.

Advantages of Bartering

There are numerous reasons why being a barter company is beneficial. As I said earlier, there are times when there is no cash readily available but good or services are. Bartering enables individuals to get what they need with what they already own.

Disadvantages of Bartering

The problem with a barter company is its incompetence. The first potential problem is the person seeking lumber may not be able to find a supplier who is in need of something the lumber seeker can provide.

The potential problem comes when trying to guarantee fair exchanges. How to calculate, for instance, a fair exchange rate of eggs for a television set? A monetary economy makes the exchange of goods and services more easily manageable.