In a traditional economy, how are economic transactions typically shaped?

• A. By customs, traditions, and cultural practices passed down through generations
• B. By supply and demand in competitive markets
• C. By government regulations and central planning
• D. By profit maximization and technological innovation

Answer: (A)

Verified step by step guidance

1. Understand the nature of a traditional economy: it is an economic system where customs, traditions, and cultural practices guide economic decisions and transactions.
2. Recognize that in a traditional economy, economic roles and activities are often inherited and maintained through generations, rather than being influenced by market forces or government intervention.
3. Contrast this with other economic systems: market economies rely on supply and demand, command economies depend on government planning, and mixed economies incorporate profit motives and innovation.
4. Identify that economic transactions in a traditional economy are shaped primarily by established social customs and cultural norms rather than by competitive markets or regulations.
5. Conclude that the defining characteristic of economic transactions in a traditional economy is their basis in customs, traditions, and cultural practices passed down through generations.