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Indivisibility makes some goods untradeable. Lots of goods are indivisible , which makes trading difficult and can cause a barter to fail. For example, one trader has a whole cow to trade, but needs only two loaves of bread. The bread is worth about 1/250th of the cow. The cow owner doesn’t want to trade the whole cow for two loaves of bread. Slaughtering the cow into pieces is no great option either. The barter fails. Engage students in a discussion: What might have happened if Kindergartner Kevin had only a whole apple to trade, rather than a bag of carrots? Answer: Unless Kevin was willing to give up his whole apple, the barter would fail. Barter impedes economic progress. Economic progress and the advancement of a civilization depends upon the ability to fund innovation, development, and the improvement of things. That can only happen if people are able to accumulate purchasing power by saving . Barter does not allow for saving of value . Many goods, like bread and wheat, cannot be accumulated and saved over time. Engage students in a discussion: Kylee wants to trade Bijan, another classmate, for his Hello Kitty pencil bag. But he’s holding out for a dozen cookies. Kylee has a problem because her cookies go stale after a day or two and they’re no good. How can Kylee accumulate enough purchasing power with her cookies? Answer: She can’t. Is Barter Still Used? Overall, barter has faded from use because it is an inefficient economic system. However, barter was used in the trading posts of the Old West, and when people simply didn’t have money. You’ll recall that in Steinbeck’s The Grapes of Wrath , the Joads often exchanged labor for a meal or a loaf of bread. Recently, barter has made a comeback in a few places. There are several online barter sites, and barter was used in Greece during a recent financial crisis. The Big Picture Commerce is as old as humanity. It began as a barter system. Some historians believe the instinct to barter is a universal human characteristic. Barter worked pretty well for a long time, but has limitations: 1) barter requires a double coincidence of wants; 2) barter lacks a common unit of measured value; 3) some goods are indivisible which limits their barter value; 4) barter stunts economic progress by not allowing for saving of value. Overall, barter is an inefficient system. Barter has mainly fallen out of use in today’s world, but the elements of barter survive and are principles of modern financial literacy. Modern commerce is based on the same concepts crusty humans used so long ago: trade, buyer, seller, price, value, supply, demand and negotiation. SLIDE 2J PRODUCT PREVIEW

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THE 21st CENTURY STUDENT’S GUIDE TO FINANCIAL LITERACY

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