Explanation

Reasons why the use of money has replaced the barter system in modern economic transactions:

(i) Barter makes specialization of labour to be limited because barter system encourages self sufficiency.

(ii) Prob-lem of the determination of the rate of exchange between two commodities

(iii) Problem of coincidence of wants: It is difficult to find one who has what you want and wants what you have.

(iv) Many goods cannot be divided into convenient sizes because of their bulkiness and indivisibility.

(v) Barter makes the question of deferred payment difficult because it is not possible to guarantee that the item paid back will be of identical size, state and quantity as the one borrowed.

(vi) The difficulty of storing wealth or value especially where the form of exchange is perishable e.g. oranges, yams etc. 
 

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