Which of the following is a characteristic of a traditional economy?

• A. Economic decisions are based on customs and traditions.
• B. Production and allocation are determined by central government planning.
• C. Prices are set by supply and demand in competitive markets.
• D. Resources are owned and controlled by private individuals.

Answer: (A)

Verified step by step guidance

1. Understand what a traditional economy is: it is an economic system where customs, traditions, and beliefs shape the goods and the services the economy produces, as well as the rules and manner of their distribution.
2. Recognize that in a traditional economy, economic decisions such as what to produce, how to produce, and for whom to produce are typically based on historical precedent and cultural practices rather than market forces or government directives.
3. Compare the options given: central government planning is characteristic of a command economy, prices set by supply and demand are typical of a market economy, and private ownership of resources is also a feature of market economies.
4. Identify that the option stating 'Economic decisions are based on customs and traditions' aligns with the defining feature of a traditional economy.
5. Conclude that the correct characteristic of a traditional economy is that economic decisions are based on customs and traditions, distinguishing it from command and market economies.