SOCIAL SCIENCE -VII (PART-1) LESSON-11 FROM BARTER TO MONEY

    

                                            SOCIAL SCIENCE -VII (PART-1)

LESSON-11

FROM BARTER TO MONEY

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1. Introduction

v Exchange in Early Societies

  Ø In early societies, people exchanged goods and services without using money. This system of exchange was known as the barter system.

   Ø People exchanged commodities such as cattle, grains, salt, tea, tobacco, cloth, seeds, and cowrie shells.

  Ø Exchange took place only when both parties agreed to trade their goods.

v Meaning of Key Terms

  Ø A transaction refers to an act of buying or selling goods and services.

  Ø Commodities are goods or products that can be bought, sold or traded.

  Ø Money is a commonly accepted medium used to make payments for goods and services.

2. The Barter System

v Meaning of Barter System

  Ø The barter system is a method of exchange in which goods and services are exchanged directly without the use of money.

  Ø In this system, people traded items they had in surplus for items they needed.

v Working of the Barter System

  Ø A person who needed a product had to find someone who was willing to exchange it.

  Ø Both parties had to agree on the value of the goods being exchanged.

  Ø The exchange was completed only when both sides were satisfied.

v Examples of Barter in Modern Times

  Ø The Junbeel Mela in Assam continues the tradition of barter exchange.

  Ø In the Junbeel Mela, tribal communities exchange vegetables, roots, herbs and handmade goods.

  Ø Book exchange clubs allow students to swap books without using money.

  Ø In many places, old clothes are exchanged for new utensils.

3. Limitations of the Barter System

v Double Coincidence of Wants

  Ø The barter system required double coincidence of wants.

  Ø Double coincidence of wants means that both parties must want each other’s goods at the same time.

  Ø It was difficult to find such perfect matching situations.

v Lack of Common Standard Measure of Value

  Ø There was no common measure to determine the value of goods.

  Ø People found it difficult to decide the fair proportion of exchange.

  Ø Disagreements often arose regarding the value of goods.

v Problem of Divisibility

  Ø Some goods could not be divided into smaller parts.

  Ø For example, an ox could not be divided to purchase smaller items.

  Ø This created difficulties in small transactions.

v Problem of Portability

  Ø Large or bulky goods were difficult to carry from place to place.

  Ø Transporting goods such as cattle or grains was inconvenient.

v Problem of Durability

  Ø Certain goods such as grains could rot or get damaged.

  Ø Perishable goods could not be stored for a long time.

4. Emergence and Basic Functions of Money

v Need for Money

  Ø The limitations of the barter system led to the invention of money.

  Ø Money acted as a common medium of exchange accepted by everyone.

  Ø Money made trade easier across long distances.

v Functions of Money

  Ø Medium of Exchange

§  Money serves as a medium of exchange for buying and selling goods and services.

§  It eliminates the need for double coincidence of wants.

  Ø Store of Value

§  Money can be stored for future use.

§  Unlike perishable goods, money does not lose its value easily.

  Ø Standard of Deferred Payment

§  Money is accepted as a standard of deferred payment.

§  People can borrow and repay money later.

  Ø Measure of Value

§  Money provides a common standard measure of value.

§  It helps in comparing the prices of goods and services.

5. The Journey of Money

v Early Forms of Money

  Ø Early forms of money included cowrie shells and other commodities. For example Rai stones Yap Island, in the Pacific Ocean, The Aztec copper.Tajadero (Spanish word for chopping knife) was a form of money used in Central Mexico and parts of Central America, Tevau (Red feather coil made from birds’ feathers) used as money on the Solomon Islands

  Ø These items were widely accepted for exchange.

v Coinage

  Ø Introduction to Coinage

§  Metal coins were among the earliest standardized forms of money.

§  Coins were issued by rulers of kingdoms.

§  The minting of coins was controlled by rulers.

  Ø Materials Used

§  Coins were made from metals such as gold, silver and copper.

§  Alloys were used to make coins stronger and durable.

§  Ancient Indian coins were called kārṣhāpaṇas or paṇas. They had symbols punched on them called rūpas.

  Ø Features of Ancient Coins

§  Coins had symbols called rūpas punched on them.

§  The obverse side(Head) and tail (reverse) carried important designs or symbols.

§  Coins often depicted animals (Varaha on chalukyas, Tiger emblem on Chola coins) deities, kings or natural motifs.

§  Roman coins found in India (Pudukkottai in Tamil Nadu ) show evidence of maritime trade.

§  1 anna was equal to 1 / 16 of a rupee! In 1947, one anna could buy a dozen bananas.

  Ø Modern Coinage

§  Today, coins are issued in various denominations.

§  Coins carry inscriptions in Hindi and English.

§  Special coins are minted to commemorate national events.

§  The Indian rupee symbol (₹ sign)  was adopted in 2010. It was designed by Udaya Kumar from the Indian Institute of Technology, Bombay (Mumbai)

6. Paper Money

v Origin of Paper Money

  Ø Paper money was first used in China.

  Ø Paper currency was introduced in India in the late eighteenth century.

v Advantages of Paper Money

  Ø Paper money is easier to carry compared to coins.

  Ø It is suitable for higher denominations.

  Ø It reduces the burden of carrying heavy metal coins.

v Role of the Reserve Bank of India

  Ø The Reserve Bank of India is the central authority controlling currency in India.

  Ø Only the Reserve Bank of India has the legal authority to issue currency notes.

  Ø Currency notes contain security features to prevent misuse.

7. New Forms of Money

v Digital Money

  Ø Digital money exists in electronic form.

  Ø It cannot be physically touched like coins or notes.

  Ø Digital money is transferred directly between bank accounts.

v Modes of Digital Payment

  Ø Debit cards and credit cards are used for cashless transactions.

  Ø Net banking allows online transfer of funds.

  Ø UPI (Unified Payments Interface) enables instant transfer through mobile phones.

  Ø QR codes are scanned to make digital payments.

v Advantages of Digital Money

  Ø Digital transactions are quick and convenient.

  Ø They reduce the need to carry cash.

  Ø They provide secure and traceable transactions.

v Evolution of Money

  Ø Money evolved from barter to commodities.

  Ø Commodities were replaced by metallic coinage.

  Ø Coins were followed by paper currency.

  Ø Paper money has gradually transformed into digital money.

  Ø The evolution of money continues with technological advancements.

v Summary of the Lesson

  Ø The barter system was the earliest form of exchange.

  Ø The barter system required double coincidence of wants.

  Ø The barter system had limitations such as lack of divisibility and durability.

  Ø Money was introduced to overcome the limitations of barter.

  Ø Money performs functions such as medium of exchange and store of value.

  Ø Coins were issued by rulers in ancient times.

  Ø Paper money replaced metal coins for large transactions.

  Ø The Reserve Bank of India controls currency issuance in India.

Ø Digital money is widely used in modern transactions.

Ø The journey of money reflects economic and technological progress.

v Glossary

Ø Barter System: a way of exchanging goods and services without using money.

Ø Money: the common tool that everybody accepts and uses in order to make or receive payments in exchange for goods and services. cloth, cattle (cows, goats, horses, sheep), seeds, etc.

Ø Transaction: a piece of business that is done between people, especially an act of buying or selling.

Ø Commodities: Products or goods that can be traded, bought and sold.

Ø Double coincidence of wants: an economic concept that describes a situation where two people each have something the other wants and can exchange them directly.

Ø Common standard measure of value: an agreed-upon worth for a transaction that helps in determining the value of goods and services in the economy.

Ø Portability: The ability of an object or material to be carried or moved from one place to another.

Ø Durability: Trait of an object or material that indicates its longevity and ability to withstand damage due to which it can be stored for a longer time period.

Ø Minting: The process of producing coins. A mint refers to a manufacturing facility that produces coins that are used as a nation’s currency.

Ø Alloy: A metal made by combining two or more metallic elements. This makes the coin strong.

Ø Obverse: the side of a coin or medal bearing the head or principal design.

Ø Currency: System of money that is used in a particular country. For example, coins and paper notes that are used in India in terms of rupee is the Indian currency.

Ø Denominations: Units in which coins and paper notes are classified. For example, denominations of Indian currency include 50 paisa, ₹1, ₹2, ₹5, ₹10, ₹20 coins and paper notes of ₹10, ₹20, ₹50, ₹100, ₹200, ₹500 and ₹1000.