COPYRIGHTED MATERIAL
Even tiny tots who have never studied business, economics, or commerce have an instinctual understanding of the elements of barter , so perhaps it is a universal human characteristic. The dynamics of barter – the buyer/ seller relationship, concepts of supply and demand, value, price, and negotiation are well-rooted in the human experience and psyche. These are the elements from which modern commerce springs. The Problems With Barter The barter system worked pretty well for a long time, but eventually people began to realize that barter has serious limitations . Once explained, these will seem pretty obvious: Barter requires double coincidence of wants. It’s not easy to find a trading partner who has what you need in the right quantity, at the right time, who wants what you have, in the quantities you have, at the same time. In economic terms, finding a trading partner with mutual need is called double coincidence of wants . This severely limits who a seller can sell to and who a buyer can buy from . When there is no double coincidence of wants, the barter fails. Engage students in a discussion: In the kindergarten barter story, there was a double coincidence of wants. How can you change the scenario to cause the barter to fail for a lack of mutual want? Answer: Any change in the mutuality of need or want, such as Kylee doesn’t like carrots, or Kevin wanted the whole bag of cookies, not just one or two. Barter lacks a common unit of measured value. That sounds complicated but it’s not. Trades have to be fair, which means that the things being exchanged must be of equal value or someone feels ripped off. How can traders measure value when the things being exchanged are so different? What happens when one trader thinks her sheepskin is worth more than the other guy’s pottery? When direct trading different kinds of stuff, there is no common unit for measuring value , which can cause a barter to fail. Engage students in a discussion: The tiny tots were able to find equal value in their trade. What might have happened if Kylee considered her cookies far more valuable than the carrots? Answer: She would not have made the trade. SLIDE 2I of homemade chocolate chip cookies, he proposes a trade . What goes through Kylee’s mind? Although only 5 years old, Kylee can accurately assess this situation. She understands that she and Kevin are in a buyer and seller transaction. She knows that she has a supply of cookies, and that Kevin has the desire (demand) for them. She knows her cookies have a greater value than Kevin’s carrots, but she would like a couple of carrots to crunch on. Negotiations begin: “I’ll give you one cookie for three carrots,” she says. He shakes his head and counters with “I’ll give you two carrots for two cookies.” She declines, and says “No way. Two cookies for three carrots. That’s my final offer.” They agree to a price and it’s a done deal. PRODUCT PREVIEW
24
Lesson 2 | Cave Man Commerce
Made with FlippingBook flipbook maker