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Introduction to Islamic Economics: Theory and Application by Abbas Mirakhor, Zamir Iqbal, Hossein Askari

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Chapter 5Key Microeconomic Concepts

  1. How consumers and producers form their decisions.
  2. How these decisions differ in Islam from those in the conventional system.
  3. How supply and demand functions are determined and how price equilibrium is reached in markets.
  4. The role and importance of markets in efficient resource allocation.
  5. Role of the state and its policies in an economic system.
  6. Difference between needs and wants.
  7. Determinants of supply and demand curves.

Though much has been written about the differences between Islamic and conventional finance, little attention has been paid to the differences in the realm of microeconomics that may in fact run even deeper. Microeconomic considerations in Islam are based on a different paradigm with answers to core economic questions that are in sharp contrast to those from conventional economics. Conventional microeconomics has been developed on the basis of hypothetical assumptions about the behavior of individuals and firms. These assumptions, though unrealistic, have continued to be largely unquestioned even though they are contradicted by prevailing facts. Moreover, conventional economics does not consider needed changes in individual and social behavior to realize its macroeconomic objectives, such as steady economic growth, full employment, and the like. This is a direct result of the dismissal by conventional economics of value judgments and its commitment to unrestrained individual freedom and choice.1

Redefining ...

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