How does a traditional economy work and what countries use this type of economy?

Answer 1

An economic system deals with who makes what, how much, who buys it, and how they get it.

In a TRADITIONAL economy everything essentially proceeds as it always has. It is controlled by tradition (hence the name) and by culture, instead of forces such as supply and demand (that would be a market economy) or by the government (that would be a planned economy). The only examples of traditional economies are ones where little has changed for centuries - it was used by aborignal Americans and still is by some African and South American tribes.

It has the advantage of being a very smooth system. Everybody knows what happening and how, and because it is an ingrained part of the culture everyone more or less agrees on it. Nobody complains about the price of gasoline because the price of gasoline never changes.

As you might imagine, unresponsiveness is one of its disadvantages - it responds poorly to changing environmental conditions (which is why there pretty much aren't any such systems except in isolation). A traditional system also does not allow much room for innovation. It doesn't matter if you can build a home in half the time using concrete instead of mud and hay... that's just not the way it's done!

Answer 2

Who Uses Traditional Economy

Answer 3

The traditional economy is the barter economy. Capitalism is representative of this. Economies that are stifled through strong govt controls usually end up spawning a 2nd, or black market economy, which more nearly approximates peoples true economic needs and activity.