Which do you think is a more basic characteristic for classifying organisms?
(a) the place where they live.
(b) the kind of cells they are made of. why?

A more basic characteristic for classifying organisms should depend upon the kind of cells they are made up of, which will differ prokaryotic and eukaryotic organisms.

An eukaryotic cell has membrane-bound organelles, including a well-defined nucleus, which allows cellular processes to be carried out efficiently in isolation from each other. These eukaryotic cells have the capacity to participate in the formation of a multicellular organism as the nucleated cells in eukaryotes can take up specialized functions thus performing complex metabolism.

A prokaryotic cell, which do not have a well defined nucleus and membrane bound organelles cannot perform complex metabolisms due to the absence of important organelles. As a result of which prokaryotic cells cannot contribute in the formation of multicellular organisms and is only present in organisms performing simple functions.

If the habitat or the place where an organism lives is taken as a basic characteristic for classification, then organisms cannot be differentiated on the basis of their structure and functions which can later make the study of each and every organisms difficult.