Money (3.1)

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Barter

Barter is when people exchange the goods or services they have to get the goods they want (without using money)

Advantages:

  • direct/can trust the goods
  • simple
  • don't need anything else

Disadvantages:

  • hard to value/set prices
  • some things are hard to store/save up
  • the other person may not want your goods

Barter depends on a Double Coincedence of Wants

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Functions of Money

Medium of Exchange - it is used to buy/pay for things

Unit of account (measure of values) - we can express all prices in terms of money

Store of value - money retains its value over time so that if we save up, the money is still worth as much

Standard for Deffered Payment - this allows people who lend money to know and trust what they will get payed back in the future

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Characteristics of Money

Acceptibility - everyone accepts it as payment for goods

Divisibility - into small and large units

Durability - it doesn't wear out or decay

Portability - it is easy to carry around or send to someone

Scarcity - it is hard to copy or duplicate so it remains scarce and valuable

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