Money and Inflation — Part 1: Meaning, Kinds and Functions of Money: visual lesson, ISC Class 12 Economics

Lesson

Money: Meaning, Kinds and Functions

Part 1 — why barter fails, what money is, its kinds, and the functions it performs.

In this lesson you will

How money evolved

Concept

Under barter, goods are swapped directly for goods. Trade is slow and often impossible.

Table of five difficulties of barter with examples from an imagined village market: double coincidence of wants, no common measure of value, indivisibility of goods, no store of value and no standard of deferred payment
Difficulty of barter	What goes wrong (imagined haat)
Double coincidence of wants	The potter wants rice; the rice grower wants sandals, not pots
No common measure of value	How many pots equal one goat? A new rate for every swap
Indivisibility	A goat cannot be split to buy a small sack of salt
No store of value	Fish and vegetables rot before they can be traded
No standard of deferred payment	A loan of rice repaid in rice may differ in quality

Concept

Money is anything that is generally accepted as a means of payment for goods and services and in settlement of debts.

How money evolved