How does a traditional economy differ from a market economy?

Question

Responses
A In a traditional system, economic decisions are based on custom.In a traditional system, economic decisions are based on custom.
B In a market system, the government answers the three basic questions.In a market system, the government answers the three basic questions.
C In a market system, a central authority owns the factors of production.In a market system, a central authority owns the factors of production.
D In a traditional system, a great variety of goods and services are available.

Answer 1

The correct response is:

A. In a traditional system, economic decisions are based on custom.

In a traditional economy, economic decisions are largely influenced by historical practices and cultural norms, often focusing on agriculture and subsistence activities. In contrast, a market economy relies on supply and demand to determine production, pricing, and distribution of goods and services, with minimal government intervention. The other options (B, C, and D) contain inaccuracies regarding the characteristics of market and traditional economies.