Tradional+System

=__**Traditional System**__=

The traditional economic system is when the economic decisions are based on tradition of the community or family. In this type of economy property and methods of making products are past down from generation to generation. Traditional economic systems are usually found in less developed countries; and countries with a lot of subsistence agriculture. Because they do not use many technological advancements economic growth is usually pretty low.

Examples of the Traditional Economic System
The traditional system is found in less developed areas of eastern Asia, South America and around half of Africa's 50 countries still use traditional systems today. Based on a World Bank estimate there are 400 million people who still use traditional systems today.
 * 1) Amish[[image:http://www.westbywi.com/images/regular/Amish-plowing-color.jpg width="230" height="128" align="right"]]
 * 2) Inuit
 * 3) Eskimos
 * 4) Bangladesh
 * 5) Burma
 * 6) India (under the caste system)
 * 7) Afghanistan

Advantages:

 * Jobs are passed down from generation to generation so people start their craft at a young age
 * Strong cultural identity
 * Allows for diversity
 * Allocative efficiency (only produce what they will use or what they need)

Disadvantages:

 * Slow economic growth
 * Bartering can lead to difficulty in trading
 * Methods are usually outdated and not very efficient
 * Very little social movement up or down classes
 * Usually lower standards of living
 * Less incentives for entrepreneurs

Goods and Services Produced
3 of the 5 fundamental questions:

1. What types of goods and services are produced? 2. How are the goods and services produced? 3. Who are the goods and services produced for?

1. It produces what it always has (from its tradition and history)- necessities, handicrafts. 2. They are often produced by hand or with simple machines (a lack of advanced technology and accumulation of capital goods). 3. They are often produced for families units and villages.

Economics In The News
In the article [|FDI is more powerful weapon for traditional economy] Dr. Badar Alam Iqbal explains how the FDI or Foreign Direct Investment can help an economy like China go from traditional to a more modern economic system. The inflow of investment from the FDI sparks an economic boom that pulls economy out of the traditional system faster then before.

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 * Sources**