What is a traditional economy?

• A. Production, distribution, and consumption of goods and services are determined by custom, tradition, and established practices passed down through generations
• B. Prices are determined by supply and demand
• C. The government sets production quotas
• D. Resources are allocated by market prices

Answer: (A)

In a traditional economy, actions about making and sharing goods follow long-standing customs and roles handed down through generations. People decide what to produce, how to produce it, and who gets the products based on family traditions and community needs rather than on new ideas or market signals. This often means farming the same crops in the same way year after year, and sharing or distributing resources according to established practices within the group. Prices aren’t set by buyers and sellers adjusting to supply and demand; instead, what is produced and shared tends to reflect time-honored practices and social roles.

This is different from economies driven by market forces, where prices and production respond to how much people want something and how available it is, and from economies where the government plans and controls what gets produced. In those systems, decisions come from external rules or price signals rather than tradition.