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Disadvantages and advantages of the barter system

Definition of barter

Barter can be defined as one of the old systems that was and is still used for many commercial purposes, and barter transactions carry in their content the exchange of benefits through the exchange of some types of goods or services between two parties. Before the use of coins and the emergence of the concept of cash buying and selling, and despite the great developments in financial and commercial operations, the concept of barter is still used in many financial and commercial transactions, and through the defects and advantages of the barter system, the feasibility of this trading system can be judged, and in this article The main advantages and disadvantages of the barter system will be discussed.

Disadvantages and advantages of the barter system
Disadvantages and advantages of the barter system

Disadvantages and advantages of the barter system

The disadvantages and advantages of the barter system are the presence or absence of a beneficial value that each of the barter parties may obtain as a result of its occurrence between the related parties. In general, the disadvantages and advantages of the barter system can be summarized as follows:

Disadvantages of barter

  • The need for bargaining: in the barter process, there is no specific criterion that gives things their true value, as the parties are bargained over the value of what is being bartered, and accordingly one party to the barter may underestimate the value of the other party's commodity.
  • Lack of need for some commodities: The repetition of the barter process between two parties leads to the repetition of obtaining some types of commodities that the barter parties may not want to obtain, which leads to less relative benefit whenever the same barter process is repeated between two specific parties.

barter Pros

  • Obtaining desirable commodities: It is the main point on which the barter process is based between any two parties, where the two parties exchange benefits by obtaining a commodity owned by the other party, such as exchanging rice for sugar, for example.
  • Achieving commodity balance: The barter process contributes to a turnover in the commodity stock that is produced by individuals. Everyone who specializes in producing a specific commodity is able to exchange it for a commodity produced by another person. Accordingly, similar commodities are distributed to many members of society, and do not remain with the producer alone.
  • Marketing of products: as the barter process does not require the existence of funds in order for a party to obtain a specific commodity, and this increases the flexibility of liberating goods and services and exchanging them among members of society.

Barter types

After identifying the disadvantages and advantages of the barter system, it is necessary to point out that there are many types of the barter process, which take place naturally in the historical or contemporary commercial reality, and the following are the types of barter:
  • Commodity barter: This type of barter is the most popular among them, in which an exchange takes place between two consumer goods, with each party to the barter having a need for the commodity owned by the other, and this is called double coincidence.
  • Bartering of services: In this type, barter takes place between a group of services or technical works between two parties, each of which specializes in a specific field, such as bartering legal services for medical services, or public accounting services for mechanical services.
  • Advertising barter: This type of barter is the latest among them, and the most used in contemporary life, and depends on the presence of advertising spaces sold by some companies in return for the other company having the right to advertise and advertise itself within that space.
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