The Exchange System: From Barter to Money

Exchange is the process of giving out value in order to have something of value in return. In the olden days barter was the main system of exchange i.e goods for goods. But nowadays one can exchange money for goods. Exchange arises because of excess production of goods and services.

Types of Goods

A. Consumer Goods: These are goods and services that can satisfy the consumers immediate needs. These goods do not require further process of production for their use by the consumers E.g motor cars,milk,radio,the service of a soldier,police,hairdresser,etc.

B. Producer or Capital goods: These are goods used by people to produce other commodities or services. Examples are buildings,motor cars,lorries,tailors tools and machines. These tools are used to carry out productive activities