Friday, February 26, 2010

Chapter 7


The Good Value of Barter in the Bad Economic Times

Summary
David Robinson, is one of the 500 members in the Arizona Trade Exchange who barters for $50 000 worth of services to maintain business operations. To be a member, a one-time fee of $495 is necessary to join. He trades granite countertops for services like his truck maintenance, office cleaning and air conditioning. Rob Miller, founder of the Mesa-based trade exchange says that the Arizona Trade Exchange had a total of $4.9 million in transactions. National Association of Trade Exchanges states that among this exchange group, there are 400 exchange groups as well that have transactions that are worth billions of dollars.

Connection
Arizona Trade Exchange is an example of a barter system. In order for barter to take place, one needs to have some item to offer for exchange. This form is a direct bartering system that requires a coincidence of wants from another person. It is the medium in which goods or services are directly exchanged for other goods or services, without the use of money. That is, if you have an item to trade you have to find someone willing to sell the item that you desire.It is difficult to express values or prices in a barter system. With no common denominator, there can be as many prices for one item as there are articles for trade. As well, divisibility is also a problem with barter because it is not possible to divide many items up into smaller units.

Reflection
In our economy, money performs the function of being a store of wealth, as well as a medium of exchange. However, the barter system is not dead. It’s good that some people are seeing the value of barter in the bad economic times. Exchange systems can generate more customers together in producing new sales and growing higher mass of businesses. It acts as a great way to offset expenses by paying in trade instead of cash. Therefore, you are able to preserve cash. Some individuals resort to barter so that they can avoid paying income and sales taxes.

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1 comment:

  1. Calvin MokMarch 1, 2010 at 11:08 PM

    I personally don't believe that the barter system would continue to work in today's society. In our current industrialized economy, the barter system just wouldn't function properly. I agree that divisibility is the major issue in the barter system. For example, if someone wanted to trade part of their computer for my bicycle, it just wouldn't be possible because the computer won't be easily divided. Furthermore, the only way of exchanging goods in today's society is to have money. With money, there won't be any problems with divisibility because every item will have a specific amount in order for it to be purchased. The barter system may be successful in the previous generation, but it just doesn't work in today's modern world.

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