Which form of economy answers the four basic economic questions based on habit and customs?

The traditional economic system answers the four economic questions based on customs and habits.

Expert Answers

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What to produce?
In a traditional system, goods are produced according to habits. Since the system has worked for generations, there is no need to change it. For example, if the community has always relied on subsistence farming, that is what they’ll produce.

How to produce it?
In a traditional system, factors of production are usually passed down through generations. Thus, when it comes to the method of production, the community follows customs. For example, it’s common for traditional societies to use slash and burn agriculture. Even though this production method causes serious environmental pollution, the community sticks with it because it’s customary.

How much to produce?
How much to produce is based on the number of dependents in a community. Those who use the traditional system rarely produce a surplus. There is minimal wastage because people produce only what they need. Also, due to the lack of machinery, the output is limited. Furthermore, production is labor-intensive and defined by traditional gender roles.

Who gets what is produced?
In a traditional system, the harvest is distributed among family members. If one family lacks a commodity, they can get what they want from another family by exchanging products. Also, in some households, the produce is distributed according to customs—for example, the head of the household gets the most because of their position.

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