The Traditional Economy

By Brandon Perez

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Definition: An economic system in which people make economic decisions based on customs and beliefs that have been handed down from one generation to the next. What this means, simply put, is that the society utilizing a traditional economy has set up roles for everyone in order to fulfill their main goal: survival.

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Advantages:

  • Society is brought closer together as they survive together.
  • Everyone has a designated role in the economy.
  • Utilize all resources in an effective way.
In a traditional economy, everything found in nature is used to its full extent.

Disadvantages:

  • Rely heavily on farm which relies on the weather (unpredictable economy).
  • Have much less profit than other economies.
  • May be ruled by higher authority who will receive leftover resources.

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Answering The Three Economic Questions

1. What will be produced?

In the Traditional Economy, tradition focuses heavily on using the land for survival. As such, the only goods and services that will be produced must be ones accessible easily and naturally.

2. How will it be produced?

As mentioned before, a Traditional Economy will use the land. Because of this, the society under this system will hunt and grow its own food and use whatever is left over for the remaining goods and services.

3. For whom will it be produced?

The society under the Traditional Economy is very close to one another and work in order to produce it for one another. As such, those producing the goods will eventually be the ones who receive it in the end.

Essentially, if an individual in the economy is not hunting, they are gathering.

Real Places Which Use a Traditional Economic System Include...

  • The Middle East
  • Asia
  • Africa
  • South America

Comment Stream

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