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Explain using the concept of utility, why barter occurs. What underlying feature must be present for barter to take place?
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The main factor governing most consumer behaviour is obtaining utility by purchasing goods and services. Utility basically expresses the satisfaction a person obtains from purchasing a particular good or service. In today's economies barter has been substituted by exchange using mediums like money. However, there was a reason why economies initially used barter which links directly to the concept of utility. In subsistence economies people tend to produce their own food depending on what they can produce more efficiently given their resources. So a person that had a large amount of fertile land would produce wheat, on the other hand...
exchange it with someone else who produces the goods that he actually wants. Thus barter, as a system of direct exchange was superseded by a money economy which is a system of indirect exchange. So the chicken producer can sell his eggs to anyone who pays gold then look for someone who produces what he really wants and who will accept gold in exchange, because he too knows that other people will also accept it in exchange for the things that he wants. This is why barter was swamped for exchange using the medium of gold and eventually money.
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