Tuesday, February 28, 2012

Trade and Barter

In primitive societies before money came into use,exchange of  products between people took place.It is known as barter system.A tribe which produced goods in excess of its requirements made over the excess goods to another tribe in exchange for the goods produced by them.

The transaction of goods was at three levels including reciprocity,redistribution and commercial exchange.Reciprocity was based on mutual understanding of the needs of two groups.When a group produced goods in excess of its own requirments it gifted the excess to others.The receiving group gave a helping hand to the other group in times of need.


Redistribution involves accumulation of goods for subsequent distribution.Commercial exchange involved prices subject to supply and demand involving goods and transactions in labour,land,rental and credit.

Most commercial transactions or trade are based on money with standard value acceptable to all.Money is used not only in commercial transactions but also in non commercial transactions as in paying fines and taxes.

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