Which of the following best describes a traditional economy?

• A. An economy where supply and demand determine prices and production with minimal government intervention.
• B. An economy where customs, traditions, and beliefs shape the goods and services produced, as well as the rules for their distribution.
• C. An economy that relies primarily on technological innovation and global trade.
• D. An economy where decisions about production and distribution are made by a central authority.

Answer: (B)

Verified step by step guidance

1. Step 1: Understand the concept of a traditional economy. A traditional economy is one where economic decisions such as what to produce, how to produce, and for whom to produce are guided by customs, traditions, and cultural beliefs rather than market forces or government directives.
2. Step 2: Identify the key characteristics of a traditional economy, which typically include reliance on historical methods, subsistence farming or hunting, and distribution based on established social roles and community practices.
3. Step 3: Compare the given options to the definition of a traditional economy. Look for the option that emphasizes customs, traditions, and beliefs as the main drivers of economic activity.
4. Step 4: Recognize that other options describe different types of economies: market economy (supply and demand), command economy (central authority), and mixed or modern economies (technological innovation and global trade).
5. Step 5: Conclude that the best description of a traditional economy is the one highlighting the role of customs, traditions, and beliefs in shaping production and distribution.