Barter exchange's major limitation was that it involved huge trading cost. Which of the following costs can be considered as part of trading costs?
Answer & explanation
Correct answer: option 3
The correct answer is option 3: Search cost and disutility of waiting
Explanation:
- Search cost: Refers to the time and effort spent finding someone who has the desired good and is willing to exchange it for what you have.
- Disutility of waiting: Refers to the inconvenience or loss of utility while waiting to find a suitable trading partner.
These costs were significant in a barter system because finding a match for your needs and waiting for the right opportunity could be time-consuming and inefficient.