CHAPTER 1 : INTRODUCTION

1. WHAT IS ECONOMICS
(CONVENTIONAL VS ISLAMIC)
2. WHAT IS THE DIFFERENCE BETWEEN
MACRO & MICRO
3. MACROECONOMIC OBJECTIVE
(CONVENTIONAL VS ISLAMIC)

DEFINITION OF ECONOMICS
Study of how society chooses to allocate its scarce
resources to the production of g & s in order to
satisfy unlimited wants Irvin B. Tucker

CONVENTIONAL

Science which studies human behaviour as a

relationship between ends & scarce means which have
alternative uses L. Robbins

Study of man in everyday business life Alfred

Marshal

Social-science study as it deals with human

behaviour in making the decision on how people
use scarce resources in fulfilling their unlimited
wants - Economist

2 problems in economy
i. Productive resources which to
produce g & s are limited
ii. Human wants for g & s are
unlimited

CONVENTIONAL

Economy has to decide how to use these

resources efficiently in order to attain the
max possible satisfaction for the members

DEFINITION OF ECONOMICS
Social science which studies the economics problems of
people imbued with islamic values M A Mannan

ISLAMIC

Study of how man can achieve al-falah through his

control, ownership & uses of these worldly resources
based on the concepts of cooperation & partnership
Akram Khan
A study used by man to fulfill his as well as societys
wants according to syariah principle Amir Mohd alFaysal as Saud
A study of human activities for obtain, manage & use
the economic resources according to the syariah
principles for the betterment of human life both
materially, spiritually in order to achieve the blessing
of Allah (al-falah) Islamics

Ultimate objective in Islam to achieve al-Falah

Mean achieve success in this world & hereafter
i.e guarantee given by Allah

ISLAMIC

How to achieve al-falah?

- All activities & DM are carried out based on
philosophic foundation of the Islamic economic
system ie
i) Hablum min Allah
ii) Hablum minan nas
iii) r/ship man vs nature & surroundings
iv) meaning of his living in this world

DIFFERENCES : CONVENTIONAL VS ISLAMIC

Conventional

Islamic

Eco obj to reach max o/put

Tends to reach the same obj as
with the use of scarce resources conventional but constrained
by the islamic ethical
philosophy
Consumer max satisfaction
Producer max

Through 4 concept ie tauhid,

rububiyyah, khalifah, tazkiyah

DIFFERENCES : MICRO VS MACROECONOMICS

Microeconomics

Macroeconomics

Part of economics that studies

indv units or economic elements
in the process of decision
making ,ie focus on small
economic units

Studies the economy as a whole

or deals with the aggregate
Seeks to understand the big
picture rather than the detailed
of indv choice

in price of sugar
National income
Production of canned pineapples Economic growth
Inflation

MACROECONOMIC OBJECTIVE
DIFFERENCES : CONVENTIONAL VS ISLAMIC
Conventional

Islamic

Achieve full employment

Max employment

Achieve price stability

Achieve equitable distribution
of income

Achieve social justice &

distribution of income & health

Achieve economic growth

Achieve optimal rate of

economic growth

Achieve in foreign sector

Universal education

OBJECTIVE OF CONVENTIOAL MACROECON

i) Full Employment
- meaning
- L force
- unemployment rate
ii) P stability
- meaning
- inflation rate
- 3 main problems associated with inflation rate
a) redistribution effect (real vs fixed income )
b) uncertainty about future price
c) money looses its function as medium of
exchange

OBJECTIVE OF CONVENTIOAL MACROECON

iii) Equitable of distribution of income
- meaning
- 2 methods
a) tax policy
b) expenditure policy
- which one is better
iv) Economic growth
- meaning & rate
- classification (actual vs potential)
- factors contribute to potential economic growth
- business cycle / trade cycle

OBJECTIVE OF CONVENTIOAL MACROECON

v) in foreign sector
- meaning
- BOP surplus vs deficit

BUSINESS CYCLE
National
output

Potential output

c Trade cycle
b

a peak
b recession
c trough
d expansion
e recovery

Time / year

OBJECTIVE OF ISLAMIC MACROECON

i) Max job opportunities
- same as conventional
ii) social justice & distribution of income & health
- concept al Falah
- will not abuse the power & wealth given
iii) optimal econ growth
- emphasize more on human capital - moral, spiritual, material
aspect
iv) Education
- equal opportunity regardless their background