Answer to Question #146516 in Economics of Enterprise for muhammad ammar khan

Question

explain, using examples, the difference between the following:

Market Process and Traditional Process

Answer 1

Market process is a process where an economy is driven by the freely operating market forces. Under market process, goods, services and productive resources are allocated on the basis of market prices. There is private ownership of resources and means of production, where owners have complete liberty to use their resources and other means of production as they want. In this process, the major decisions of resource allocation are taken by individuals in the form of consumers and producers., since the sources of production are usually privately owned. Canada, Japan, U. S and various western European countries exhibit market process.

The traditional process is common in the rural and non industrial regions. In this process, individuals do things the way they have always been doing. Families and tribal units decides what to produce and consumes what they produce. The same old methods of production are used which are based on traditions, customs and habits. In traditional process, the customs and traditions are used to decide what to produce, how to produce, and for whom to produce. This kind of process is usually found in few African countries and few societies in the rain forests of Latin America.