Trade,exchange and development of money

How did societies economic systems begin?

They began as subsistence economies- each individual produces just enough to survive, no leisure time and no other goods.

Development of money

1- people specialise in tasks they are better at (fishing)

2- leading to people specialising, tasks were divided

3- more could be produced (more than survival), each member of the community becomes dependent on others

4- output rises and the community has a surplus (extra goods after needs are met)

5- it is exchanged with other communities, this exchange without money is barter, depends on the double coincidence of wants

6- as further communities specialised they become dependent on each other for the good they produce best (interdependence)

The functions of money

• a medium of exchange; overcomes the need for the double coincidence of wants

• a store of value (saving)

•a way to account for and compare business activity (profit)

• a standard of deferred payment; you will only lend if you are guaranteed a return

The characteristics of money

Portable

Acceptable

Durable

Divisible

Limited

Extremely difficult to forge

Recognisable