# Exchange

Exchange means mutual transfer of wealth between two parties. Exchange may be of two forms:

(a) Barter Exchange
(b) Purchase and Sale Exchange

## Barter Exchange

It is direct exchange of one commodity for another. The system prevailed in primitive stage. People experienced a number of inconveniences in barter; therefore, it was soon given.

## Purchase and sale Exchange

This is the system in which all transactions are done in exchange for money. Things are purchased and sold in exchange of common medium called money. This system removed the inconveniences of the Barter system.

1. It enables people and countries to utilize their best resources.

2. It enables us to consume commodities which we will not have consumed otherwise.

3. It increases productive capacity of each worker. He can adopt an occupation for which he has inclination.

4. It has enlarged the area of the market and has led to large scale production.

5. Both the parties gain utility by exchange.

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