From Barter to Money

1. Barter System

  • Before money, people exchanged goods and services directly.

  • Example: Exchanging wheat for shoes, or rice for cloth.

  • Commodities used: cowrie shells, salt, cattle, cloth, tea, seeds, tobacco, etc.

  • Problems of Barter:

    • Double coincidence of wants – Both people must want exactly what the other has.

    • No common measure of value – Difficult to decide how much wheat equals a sweater.

    • Divisibility – An ox cannot be divided for a sweater.

    • Portability – Carrying wheat or cattle everywhere is hard.

    • Durability – Goods like wheat spoil or get damaged.

2. Need for Money

  • To solve barter’s problems, people invented money as a common medium of exchange.

  • Functions of money:

    • Medium of exchange – Used to buy and sell goods.

    • Measure of value – Helps compare prices.

    • Store of value – Can be saved and used later.

    • Standard of deferred payment – Payments can be postponed.

3. Evolution of Money

  • Cowries & objects → Metallic coins → Paper money → Digital money.

  • Coins in ancient India:

    • Called kārṣhāpaṇas or paṇas.

    • Made of gold, silver, copper.

    • Carried symbols like animals, kings, gods, etc.

  • Paper Money:

    • First used in China, later in India in the 18th century.

    • Today issued only by the RBI (Reserve Bank of India).

  • Digital Money:

    • Debit/credit cards, net banking, UPI, QR codes.

    • Intangible form; directly transfers from one account to another.

4. Modern Relevance

  • Barter still exists in some places (e.g., Junbeel Mela in Assam).

  • Exchange of old clothes for utensils, book exchanges, etc.




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📘 Intext Questions with Answers

Q1. How did exchange take place before money?

Ans. People exchanged goods and services directly without money. This system was called the barter system.

Q2. Why did money come into existence?

Ans. Money came into existence to overcome the problems of barter such as double coincidence of wants, lack of standard value, divisibility, portability, and durability.

Q3. How has money transformed into various forms over time?

Ans. Money evolved from barter system → cowrie shells and commodities → metallic coins → paper money → digital money like UPI, debit/credit cards, and QR codes.

Think About It (pg. 231–234)

  • Difficulties in barter: finding someone who wants your goods, unfair exchange, no storage, heavy to carry, perishable items.

  • Double coincidence of wants: Farmer needs shoes, sweater, medicines, but he must find people who want his ox/wheat.

  • Lack of common value measure: Hard to decide if one ox = one sweater.

  • How money helps: Easy to store, carry, divide, and use as a common standard.



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