Question

Short-Answer / Open-Ended Questions
1. Explain how a traditional economy determines
o What to produce, how to produce it, and for whom.
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Answer 1

In a traditional economy, decisions are guided by customs, habits, and long-standing social roles rather than markets or central planning. That affects the three basic questions as follows:

- What to produce
- Determined by historical needs and local resources: staples and goods that the community has always produced (e.g., particular crops, livestock, or fish). Cultural preferences and rituals also shape what is made.

- How to produce it
- Methods passed down through generations: low-technology, labor-intensive techniques, and a customary division of labor (by age, gender, or clan). Production emphasizes techniques known to work in the local environment and often prioritizes sustainability.

- For whom to produce
- Distribution follows kinship, community norms, and reciprocal obligations: goods go first to family and community members according to tradition, with any surplus exchanged by barter or redistributed through customary institutions (elders, chiefs, communal sharing).

Overall, tradition and social roles preserve stability and continuity but limit rapid change, specialization, and productivity. Examples include subsistence farming communities, pastoralist societies, and some indigenous groups.