Which of the following is NOT a characteristic of a traditional economy?

• A. Economic decisions are based on customs and traditions.
• B. Barter is commonly used instead of money.
• C. Prices are determined primarily by supply and demand in competitive markets.
• D. Production methods are often passed down through generations.

Answer: (C)

Verified step by step guidance

1. Step 1: Understand what a traditional economy is. A traditional economy is one where economic decisions are guided by customs, traditions, and cultural beliefs rather than market forces or government directives.
2. Step 2: Identify the typical characteristics of a traditional economy. These usually include reliance on barter instead of money, production methods passed down through generations, and economic decisions based on customs and traditions.
3. Step 3: Recognize that in a traditional economy, prices are generally not determined by supply and demand in competitive markets. Instead, prices and production are influenced by established customs and social norms.
4. Step 4: Compare each statement to these characteristics. The statement 'Prices are determined primarily by supply and demand in competitive markets' does not align with the nature of a traditional economy.
5. Step 5: Conclude that the statement about prices being determined by supply and demand is NOT a characteristic of a traditional economy, making it the correct answer to the question.