Principles of Microeconomics from an Islamic Perspective: Chapter 2 - Economic Systems

Flashcards covering the definitions, comparison, and characteristic features of Capitalism, Socialism, and the Islamic Economic System as presented in the lecture notes.

How does the transcript define an economic system?

An institutional framework through which every society interacts with societal and natural laws to answer basic economic questions such as what to produce, how to produce, and for whom to produce.

According to the Webster’s International Dictionary, what is the definition of a 'system'?

An aggregation or assemblage of objects united by some form of regular interaction or interdependence, functioning as an integral whole to attain a specific goal often in obedience to some form of control.

What are the three core components of any system identified in the text?

1. It comprises different entities and components. 2. Components interact in an organized way. 3. The outcome of the interaction leads to the fulfillment of certain objectives.

In the context of Malaysian history mentioned in the text, what was the deficit budget declared by Dr. Mahathir Mohammad in the 1999 budget?

A deficit budget of $RM65.9$ billion ($RM16.6$ billion deficit) to revive the economy during recession.

What are the four 'natural laws' listed that exist in every economy regardless of values or geography?

Diminishing marginal utility, Law of diminishing returns, Law of increasing opportunity cost, and Diminishing marginal rate of technical substitution.

What are the three primary components of an economic system sub-system stemming from a worldview?

Philosophical Foundations, Operational Principles, and Goals and Objectives.

How does the text define 'Tangible property' (also known as real property)?

Properties that have physical existence and provide physical services, such as land, buildings, cars, computers, and capital equipment.

What is 'Intangible property' according to the transcript?

The product of creative efforts of the human intellect, such as music, computer programs, and inventions, protected by copyright and patent laws.

What is the difference between 'State owned property' and 'Common property' in the public sector?

State owned property is controlled and managed by the state in the public interest, while common property belongs to all people who have equal access to it (e.g., public parks and the sea).

What is 'Indicative Planning' and which countries were used as examples?

A system where the state identifies areas for development and provides incentives while letting market forces behave with their own rationale. Examples include France and Malaysia.

Who is the philosopher associated with the foundation of present-day socialism and the author of 'Das Kapital'?

Karl Marx.

What is the core coordination mechanism for capitalism, and what 'lubricant' does it use for interaction?

The market or price system is the coordination mechanism, and the price system acts as the lubricant for interactions between buyers and sellers.

What is the definition of 'Falah' in the Islamic economic system?

Ultimate happiness or success in both this world and the hereafter.

What is the meaning and purpose of 'Shura' in a decision-making context?

A supreme body of decision-making in an Islamic state composed of selected qualified individuals who make decisions based on truth and justice through mutual consultation.

What is the 'Institution of al-Hisba' and the title of the person who administers it?

A regulatory body that ensures market interactions follow Islamic rules, prevents fraud, and regulates municipal services. It is administered by a Muhtasib.

What is 'Zakah' and what is its main objective?

An obligatory financial levy on the surplus wealth of Muslims intended to transfer wealth from the rich to the poor to reduce income disparity and provide social security.

What is 'Maqasid al-shariah' and what is its primary objective?

The objectives of shariah, which aim to protect the public interest (maslaha) by seeking the useful and removing the harmful.

What are the five essential things protected under Maqasid al-shariah?

1. Religion 2. Life 3. Reason (Intellect) 4. Descendants 5. Property.

In an Islamic context, what are the three stages of property use to fulfill wants?

(a) daruriyyah (necessities), (b) hajiyyat (requirements), and (c) tahsiniyyat (beautification).

What is the 'significance of scientific method' according to the text?

The power of science is prediction, and its usefulness lies in making policies based on those predictions to solve problems.