The Traditional Economy

Definition of a traditional economy

A traditional economy is one that is based on previous cultural traditions and emphasizes the compliance with these traditions. The traditional economy is a system that has been used since prehistoric times. This system is still used today, mainly in places like Africa, Latin America, and the Middle East. Even in a successful traditional economy, it may seem that people are living in poverty, even though their needs are being met. This is because a traditional economy may use a system of bartering instead of money.


The traditional economy is usually very organized. This is due to there being a previously established set of traditions and economic practices that are passed down from generation to generation. These traditions are rarely changed and this makes for a system that is easy to maintain. Traditional economies are usually less destructive to the environment as well, so they are much more sustainable.

The main disadvantage of a traditional economy is its vulnerability to change. Since they are usually agriculture-centered, they can be devastated by changes in weather patterns, such as droughts. Also, since traditional economies almost never see technological advance, they are much more vulnerable to advanced nations with market economies. These nations may want to take the resources from the traditional nation and may turn to armed conflict, which would damage the traditional nation.

addressing the basic economic questions

What will be produced?

The traditional economy is one that depends mainly on natural resources in the area. Since agriculture is the main focus of a traditional economy, the products produced would be based on what resources are available, such as different types of crops in different areas. Traditional economies do not trade often, since they all consume the same basic resources, so resources are rarely imported.

How will it be produced?

Since a traditional economy usually does not have advanced technology, resources would mostly be gathered by hand or with basic tools, such as plows. The workforce for a traditional economy is usually very labor-intensive and uses the same methods throughout the society.

For whom will it be produced?

Traditional economies have citizens that are mostly of the same economic class and since the resources gathered are usually basic survival needs, they would be distributed to all of the citizens. Luxuries would be scarce, but they would probably be distributed to the higher social class.

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