Chapter 2, Problem 12AA

Solution

To ascertain: The way traditional economy would answer the question the way an economic system would produce the goods and services.

In traditional economy, the basic questions are answered according to tradition that means things are done as the way they have always been done. In this, customs and beliefs are the key for taking economic decisions that have been handed down generation to generation. Let us assume that a person is a farmer so in a traditional economic system the parents of that person will teach them farming only which they have learned from their parents. The advantage of this economy is that the person knows what others have expected from that person. The disadvantage is that the change is not acceptable in traditional system. In case of consumer goods, choices are rare. In addition to this, people rarely experience the increase in material well being . This means things remain the same.