An economic system in which decisions about production and consumption are based on custom and tradition.

• A. Traditional Economy
• B. Command Economy
• C. Market Economy
• D. Economic Equity

Answer: (A)

This question tests how decisions about production and consumption are guided in different types of economic systems. In a traditional economy, choices flow from customs, beliefs, and social roles that have been handed down through generations. Production tends to follow what has always been done—often farming, fishing, or herding—so goods and services are produced to meet the community’s established needs, frequently using barter rather than money. This approach provides stability and continuity within the group, but it also means change and innovation occur slowly.

It differs from a command economy, where a central authority makes most production and distribution decisions, and from a market economy, where decisions are driven by prices and voluntary exchanges in markets. Economic equity isn’t itself a distinct system of decision-making like these; it refers to fairness in how resources and outcomes are distributed, rather than the mechanism by which choices are made.