Exam POB

• Barter


  The exchange of goods or services for other goods and services without the use of money.
• Double coincidence of wants


  Two people who each want what the other has to offer.
• Surplus production


  Output in excess of what a producer requires for his or her own use.
• Money


  Anything that serves as a generally acceptable means of exchange. Includes physical objects, e.g. cowrie shells and paper money, as well as cards and electronic forms of payment.
• Deferred payments


  Payments that are made in the future for a current debt.
• Cowrie shells were an early form of money.
• Advantages of barter


  • People can access goods that they do not produce themselves
  • People can specialise in producing one or a small number of goods
  • Surplus production can be traded
  • There is no need for money
• Disadvantages of barter


  • It requires finding someone willing to barter
  • There is no common measure of the value of items (as would be the case with money)
  • It is difficult to "save" bartered goods in the same way that you would save money
  • Certain goods cannot be broken up into smaller units (in the way that money can)
  • It is difficult to transport certain goods once they have been received
• A subsistence economy is one in which people are able to provide for their own wants and needs through farming and fishing, supplemented by some barter trading.
• Characteristics of items used as money before coins and notes were introduced


  • Scarcity
  • Acceptability
  • Portability
  • Durability
  • Divisibility
• Barter only works effectively where there is a double coincidence of wants.
• If a firm increases advertising then their demand curve shifts right. This increases the equilibrium price and quantity.
• Marginal utility

  The additional utility (satisfaction) gained from the consumption of an additional product.
• If you add up marginal utility for each unit you get total utility.
• Instruments of exchange/payments are the means through which a payment is made, e.g. notes and coins, cheques and m-money.
• Drawer


  A person making out a bill of exchange, such as a cheque ordering the payment of funds.
• Drawee


  Usually the bank responsible for following the drawer's instruction to transfer funds to the payee.
• Payee


  A person entitled to payment by the drawee as a result of instructions made by the drawer.
• Instruments of exchange/payment

  • Barter
  • Bills of exchange
  • Electronic transfer
  • Tele-banking and e-commerce
  • Cheques
  • Money order
  • Debit cards
  • Credit cards
  • Bank draft
  • Telegraphic money transfer
  • Bank transfers
  • M-money, mobile money and mobile wallets
• Crossed cheque


  A cheque that has two parallel vertical or diagonal lines drawn across it, indicating that the cheque must be deposited into an account.
• Order


  A written instruction binding one party to pay a fixed sum on an agreed settlement date.
• Payment methods have become more sophisticated.
• Money and coins have replaced barter for most payments.
• Cheques, bills of exchange, cards and mobile wallets are widely used.
• Settlement date

  The date on which a financial transaction is completed
• You should be able to identify some of the key details on a given instrument of payment
• Only four of the most common instruments are outlined here but make sure that you can Identify key details on other instruments such as debit cards
• Layout of a cheque


  • Drawee's name
  • Payee's name
  • Drawer's name
  • Sum being paid
  • Date
• A crossed cheque has to be deposited in a bank account: it cannot be cashed
• Layout of a bill of exchange

  • Drawer (Caribbean Exporters)
  • Drawee (Royal England Importers)
  • Payee (Bank of Barbuda)
  • Sum (£10,000)
  • Date (60 days after issue)
• Layout of a credit card

  • Cardholder name
  • Issuing bank
  • Card number
  • Issue and expiry dates
  • Card type
• Layout of a money order


  • Sender
  • Receiver
  • Amount
  • Date
• Means of payment usually involve a drawer, drawee and payee
• The payment method enables the transfer of funds to the payee
• Bank details appear on most payment methods
• You may be asked to identify key information that appears on an instrument of payment such as the drawer, drawee and payee
• You should also be able to explain how the instrument works
• Private sector businesses

  • Companies
  • Partnerships
  • Sole traders
• Public sector businesses

  • Government departments
  • Public corporations
• Shareholder


  Someone who is a part-owner of the business; the shareholder will typically have many shares