Subsistence Economy

Principles Of Business
Grade 10
 Subsistence Economy - In a
What is a subsistence economy human
being focused on survival

Subsistenc and not so much on

improving their economic
well-being. In this type of
e economy every community
produced goods and services
Economy? to supply its own needs and
wants.
Activities in Subsistence Economies

The activities of the subsistence economics

is based on agriculture and livestock.
Example
• Hunting
• Fishing
• Picking fruit ,seeds and herbs.
Satisfaction of needs
Direct satisfaction of needs and wants :
and wants
man provides for himself and his family.
Satisfaction of needs and wants
Indirect satisfaction of needs and wants – man with the assistance
from others provides for him and his family’s needs, through the
use of money.
 Advantages of Subsistence Economy

• The main advantage of traditional economy is that this type of economics produces

only those goods and services which are required for the survival or which they want

to consume. Hence there is no surplus or wastage and hence it does not waste

resources for goods and services which are unnecessary. Also in this economy people

know exactly what their roles or job is and hence there is no duplication of effort.
 Advantages of Subsistence Economy cont’d

• The chance of overproduction is low. This is because participants know in

advance what resources they will receive for their services.

• Persons are born into their roles in the community. E.g. he son of the fisherman,
for example, goes on to become a fisherman as well.

• Less competitive.

• Decisions are often made by the community as a whole or by one particular

family or tribal leader.
 Disadvantages of Subsistence Economy
• However it suffers from certain disadvantages like this type of economy resist any

changes because they tend to think that methods and procedures which are

followed by their ancestors for generations are correct and hence which in turn

leads to lower productivity thus leading to lower development of the society or

country as a whole. Also due to this lower productivity people have lower

standard of living than other economies which does not follow traditional

economics. Also in this type of economies people have to do job which they are
 Disadvantages of Subsistence Economy
cont’d
• Low living standards
• Poor health and education as there is no government to provide these
services.

• Occurrences like drought, temperature variations, flooding, tsunami,

hurricanes, and tropical storms can significantly reduce the amount of
goods produced. When this happens, the society does not have access
to alternative resources because money is unavailable or difficult to
obtain. Not only does the economy suffer in this situation, but the
1. What is Subsistence Economy ?
2. Give three (3) activities that occur in a
subsistence economy.
3. Explain what is it meant by “Direct
satisfaction of needs and wants”.
4. Explain what is it meant by “Indirect
satisfaction of needs and wants”.
5. Give two (2) advantages and two (2)
disadvantages of subsistence economy.