Does your family have any traditions or customs? Do you have a special cake for each birthday that is celebrated? If so, you may have an idea of how traditions work. In some cultures, traditions impact every facet of society, including the economy.

In this lesson, you will examine the characteristics and economic activities associated with a traditional economy.

You may be more familiar with the characteristics of a free enterprise or market economy where buyers and sellers make individual economic decisions. In a market economy, individuals earn wages (from the job of his or her choice) to buy the clothes, food, and other items that are wanted or desired.

In contrast, a traditional economy is an economic system where economic decisions and the allocation of resources are based on habits or rituals. Economic activities of a traditional economy are also rooted in the habits, rituals, or customs of the culture; these activities are mostly centered toward the family unit. Activities such as farming, hunting and gathering, and fishing are done the same way from generation to generation.

In traditional economies, technology is scarcely used, if at all. The work is done with manmade, and sometimes primitive, tools. Men and women also have distinct roles in these economic activities.

In this lesson, you will learn about cultures with traditional economies that exist in our world today and how the cultures try to maintain the important customs and traditions.