The barter system is a method of exchange where people trade goods and services directly without using money. For example, if a farmer has apples and needs shoes, they can find a shoemaker who wants apples. They can agree to trade a certain number of apples for a pair of shoes, making both parties happy without needing cash. This system was common before the invention of money and is still used in some communities today. It relies on the idea of mutual benefit, where each person values what the other has to offer. The barter system highlights the importance of negotiation and trust in trade.