For example, a farmer might trade surplus grain for livestock from a herder, while a skilled craftsman could exchange crafted tools for food or other desired items. The value of goods was determined mutually between the trading parties based on perceived usefulness and relative scarcity.
Commodity Money: As societies evolved, certain commodities naturally emerged as widely accepted means of exchange, known as commodity money. These commodities had inherent value beyond their practical use, making them commonly adopted as mediums of exchange.
Examples of commodity money include:
1. Precious Metals: Gold, silver, and bronze were among the earliest forms of commodity money. Their durability, scarcity, and universal recognition made them reliable stores of value and acceptable for trading.
2. Livestock: In agricultural societies, cattle, sheep, or goats served as forms of currency due to their economic value as assets and sources of food, milk, and skins.
3. Agricultural Products: In some instances, specific agricultural products like tea, salt, grains, or tobacco gained monetary value as commodities widely demanded across communities.
The use of commodity money marked a transition from the barter system and facilitated more complex economic activities in ancient societies. However, these early forms of currency had practical limitations in terms of divisibility, portability, and durability, eventually leading to the development of coins and paper money.