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In the early era when bartering was used a simple form of specialization was used. Persons made goods, hunted and gathered

foods for their uses. This was called subsistence / direct production. Direct production is when one produces products for personal use without the help of others, for example subsistence farming, sewing own clothes and constructing a house for self. Back

then in the villages persons first started to specialize in the making of goods like pots, tents etc for their personal uses. By engaging in

specialization they were able to make a surplus (an amount greater than their needs).Specialization is defined as the situation where an individual focuses on a particular task and so become an expert in doing so. After the realization that they were good at making things for themselves they then broaden the horizon to produce more so that other persons’ needs can be satisfied. In doing so, they started to do indirect production. Indirect production is a type of production in which goods and services are produced in a large scale mainly for selling .

Division of labour-the assignment of different tasks to different persons to achieve efficiency.

Specialization of labor-is the separation of larger tasks into smaller tasks to different workers given that they have the skills and

knowledge to perform tasks at the expected quality.

Barter-this is referred to as the exchange of goods and services of other goods and services without the use of money.

What are some problems associated with bartering:

- The lack of double coincidence – this is described as a problem because in order for the exchange of goods and services to occur both parties(person A and person B) must want what each other has to offer .If there is no mutuality ( the parties do not want what

they both have or doesn’t have what they want ) then a problem arises and bartering cannot occur.

-Store of wealth- this is described as a problem because the goods that were being bartered were usually perishable (easy to

spoil).This is another problem because back in the early era/stone age persons didn’t have the resources and or facilities

needed to store their goods as a result they were unable to store perishable goods for a long period of time. Store of wealth was a problem as well because the quality of goods reduce after a period of time. Storage became a problem also

because goods were sometime bulky (cattle) and so large spaces were needed .

Inability to make deferred payment-This situation is like the act of trusting or credit goods and services. This is where goods and services were exchanged however their value was not received at the time of the transaction. Deferred payments are payments that are made in the future. This problem became a problem because disputes can arise due to the possible change in quality of goods received today and tomorrow.

Common measure value-the lack of common measure value is where the the goods and services didn’t have any monetary value and so it was difficult to find a common value/price when exchanging goods and services.

-Example-Person A has 1lb of rice and person B has an Iphone ; both goods had a different value and so it was a problem to find the correct quantity to match the Iphone since it is more expensive.