Which of the following statements describes a disadvantage of a traditional economy?

• A. It encourages frequent changes in consumer preferences and market trends.
• B. It relies heavily on government intervention to allocate resources.
• C. It often resists technological innovation, leading to lower productivity.
• D. It typically experiences rapid economic growth and industrialization.

Answer: (C)

Verified step by step guidance

1. Step 1: Understand what a traditional economy is. A traditional economy is one that relies on customs, history, and time-honored beliefs to make economic decisions. It often depends on agriculture, hunting, fishing, and gathering, with economic roles passed down through generations.
2. Step 2: Identify the characteristics of a traditional economy. These include resistance to change, reliance on established methods, and limited use of technology. This means innovation and adaptation to new market trends are usually slow or minimal.
3. Step 3: Analyze each statement in the problem to see if it fits the characteristics of a traditional economy. For example, frequent changes in consumer preferences and market trends are more typical of market economies, not traditional ones.
4. Step 4: Recognize that government intervention is more associated with command economies, so heavy reliance on government to allocate resources does not describe a traditional economy.
5. Step 5: Conclude that the statement 'It often resists technological innovation, leading to lower productivity' correctly describes a disadvantage of a traditional economy because such economies tend to stick to old methods, which can limit productivity and growth.