Islamic Economics

Islamic Economics is a social science which studies the economic problems of the people who dilhami by Islamic values [1]. Islamic economic cooperation or economic system is different from capitalism, socialism, and state welfare (Welfare State). Is different from capitalism as opposed to the exploitation of Islam by the owners of capital to the poor laborers, and prohibits the accumulation of wealth [2]. In addition, the economy in the Islamic goggles are recommended as well as the demands of life that has a dimension of worship.

Islamic economic differences with the conventional economic

! Main article for this section are: Islamic Economics vs. conventional economic

Islamic economic system is very different from the capitalist economy, socialist or communist. Islamic economic nor in the midst of the economic system is the third. Very contrary to the capitalist a more individualized, a socialist who provide nearly all responsibility to its citizens and communist extremes [1], the Islamic economy and determine which form of trade that perkhidmatan can and can not in transaksikan [4]. Economics in Islam must be able to provide welfare for the whole community, provide a sense of justice, togetherness and family and able to provide greater opportunities for every business.

Characteristic of Islamic economics

Not much is mentioned in the Qur'an, and only the principles underlying it. For reasons that are very precise, the Qur'an and Sunnah lot of talk about how Muslims should behave as producers, consumers and owners of capital, but only a little about the economic system [5]. As expressed in the discussion above, in the Islamic economy should be able to provide greater opportunities for every business. In addition, Islamic economics emphasizes four qualities, among others:

1. Unity (unity)
2. Balance (equilibrium)
3. Freedom (free will)
4. Responsibility (responsibility)

Humans as representative (the Caliph) of God in the world is not likely to be individualistic, because all the (wealth) is in the earth belongs to God alone, and man is his belief in the earth [2]. In running its economic activities, Islam is forbidden usury activities, which in terms of language means "excess" [6]. In the Quran surah Al Baqarah verse 275 [7] mentioned that people who eat (take) usury [8] can not stand but as stands the devil possessed people because (pressure) derangement [9]. Their situation is such that, is because they say (think), actual trading is like usury, but Allah has justifies the sale and purchase and forbids usury ..

Economic Development

Economic development is a process of increase in total income and income per capita by taking into account the population and is accompanied by fundamental changes in the economic structure of a country.

Economic development can not be separated from economic growth (economic growth); economic development to encourage economic growth, and vice versa, facilitate the economic growth process of economic development.

What is meant by economic growth is the increase in production capacity of an economy are realized in the form of an increase in national income [1]. A country is said economic growth in the event of an increase in real GNP in the country. The existence of economic growth is an indication of the success of economic development.

The difference between them is the success of economic growth more quantitative, ie the increase in income and the standard output is produced, whereas the more economic development is qualitative, not only increase production, but there are also changes in the structure and allocation of production inputs on various sectors of the economy such as in institutions, knowledge, and techniques.
[edit] Factors
Natural resources owned by affecting economic development.

There are several factors that affect the growth and economic development, but in essence these factors can be grouped into two, namely economic factors and noneconomic factors.

Economic factors that affect economic growth and development of which is the natural resources, human resources, capital resources, and expertise or entrepreneurship.

Natural resources, including land and natural resources such as soil fertility, climate / weather, forest products, mining, and seafood, greatly affect a country's industrial growth, particularly in the provision of raw materials production. Meanwhile, skills and entrepreneurship needed to process raw materials from nature, becomes something that has a higher value (also known as the production process).

Human resources also determine the success of national development through the number and quality of the population. Large number of population is a potential market to market production results, while the quality of the population determines how much productivity is there.

Meanwhile, capital resources humans need to process these raw materials. Capital formation and investment aimed to explore and cultivate wealth. Capital resources in the form of capital goods is very important for the development and facilitation of economic development because of capital goods may also increase productivity.

Noneconomic factors include socio-cultural conditions in society, the political situation, and developing systems and regulations.

Microeconomics

Micro economics (often also written microeconomics) is the branch of economics that studies how individuals and corporate customers as well as determination of market prices and quantities of factor inputs, goods and services bought and sold. Microeconomics examines how these decisions and behaviors affect the supply and demand for goods and services, which will determine the price and how prices, in turn, determine the supply and demand of goods and services. [1] [2] Individuals who do a combination of consumption or optimal production, together with other individuals in the marketplace, will establish a balance in the macro scale; with the assumption that all else equal (ceteris paribus).

The opposite of the micro economy is the macro economy, which discusses the overall economic activity, especially regarding economic growth, inflation, unemployment, economic policies related to [3], and the impact of various government actions (eg changes in tax rates) on these matters

Overview

One of the goals of microeconomics is to analyze market mechanisms that establish relative prices of products and services, and the allocation of limited resources amongst many alternative uses. Microeconomics analyzes market failure, where markets fail to produce efficient results and explain the theoretical conditions needed for a perfectly competitive market. Research areas are important in microeconomics, including a discussion of general equilibrium (general equilibrium), the market situation in asymmetric information, choice under uncertainty, and economic applications of game theory. Also considered is the elasticity of products in the market system

Assumptions and definitions

The theory of supply and demand usually assumes that markets are perfectly competitive. This implies that there are many buyers and sellers in the market, and none of them have the capacity to influence prices of goods and services significantly. In many real-life transactions, this assumption fails because some individuals (both buyer and seller) have the ability to influence prices. Often, it takes a more in-depth analysis to understand the demand-supply equation of a good. However, this theory works well in simple situations.

Economic mainstream (mainstream economics) does not assume a priori that markets are preferable to other forms of social organization. In fact, much analysis is devoted to cases where so-called "market failures", which led to the allocation of resources suboptimal, when viewed from a certain perspective (an example is simply the toll road, which benefits everyone to use but do not directly benefit them to finance it). In this case, economists will try to find policies that will avoid waste directly under government control, indirectly by regulation that induces market participants to act in a manner consistent with optimal welfare, or by creating "missing markets" to allow efficient trading where none had previously existed. This is studied in the field of collective action. It should be noted also that the "optimal welfare" usually takes Paretian norm, which in its mathematical application of Kaldor-Hicks efficiency, not consistent with the Utilitarian norm within the normative side of economics which studies collective action, namely public choice. Market failure in positive economics (microeconomics) is limited in implications without mixing the belief of the economist and his theories.

Demand for various commodities by individuals is generally referred to as a result of utility-maximizing process. The interpretation of the relationship between price and quantity demanded of a given item, given all the goods and other services, this set of choices that will provide the highest happiness for consumers.

Model operation

It is assumed that all firms are following rational decision-making, and will produce at the profit-maximizing output. In this assumption, there are four categories in which companies profit will be considered:

* A firm is said to be making an economic profit when its average total cost is lower than each additional product at the profit-maximizing output. The economic profit is equal to the quantity output multiplied by the difference between the average total cost and price.
* A firm is said to be making a normal profit when its economic profit equals zero. This occurs where average total cost equals price at the profit-maximizing output.
* If the price is between the average total cost and average variable cost at the profit-maximizing output, then the company is in a state of minimal losses. The firm should still continue to produce, because the loss would be larger if it stopped production. By continuing production, the company can offset its variable costs and fixed costs eventually, but by stopping completely it would lose all its fixed costs.
* If the price is below average variable cost at maximizing profits, companies should go into shutdown. Losses are minimized by not producing at all, because production would not generate significant benefits to cover all fixed costs and part of the cost variable. By not producing, the firm loses only its fixed cost. With the loss of fixed cost the company faces a challenge. Will exit the market completely or remain competitive with the overall risk of loss.

Market Failure

In microeconomics, the term "market failure" does not mean that a market is no longer functioning. In fact, a market failure is a situation where a market efficiently organize production or allocate goods and services to consumers. Economists normally apply the term to situations where the inefficiency is particularly dramatic, or when it is suggested that non-market institutions will provide the desired results. On the other hand, the political context, stakeholders may use the term market failure to situations where market forces do not serve the "public interest", a subjective statement which is usually made of social or moral grounds.

Four main types of causes of market failure are:

* Monopolies or other cases of abuse of market power where a "single buyer or seller can exert significant influence over prices or output. Abuse of market power can be reduced by using the laws of anti-trust. [5]
* Externalities, which occur in cases where "the market does not take into account the impact of economic activity in outsiders." There are positive externalities and negative externalities. [5] Positive externalities occur in cases such as family health program on television improve public health. Negative externalities occur when a company's processes pollutes air or waterways. Negative externalities can be reduced by using government regulations, taxes, or subsidies, or by using property rights to force companies and individuals to accept the consequences of their economic activity at the level they should.
* Public goods such as national defense [5] and public health initiatives such as draining mosquito-breeding marshes. For example, if draining mosquito-handed in the private market, far fewer marshes would probably be drained. To provide a good supply of public goods, nations typically use taxes that compel all residents to pay for these public goods (due to scarce knowledge of the positive externalities on third parties / social welfare).
* Cases where there is asymmetric information or uncertainty (information inefficiency) [5]. Information asymmetry occurs when one party to a transaction has more information and better than the other party. Usually the seller that knows more about the product than the buyer, but this does not always happen in this case. For example, the used car business may know mbil has been used as a delivery car or taxi, information that is not available to the buyer. Instances where the buyer has better information than the seller be an sale of a house, which requires the testimony of the previous occupants. A real estate broker to buy this house may have more information about the house than the family members left behind. This situation was first described by Kenneth J. Arrow in a seminal article on health care in 1963 entitled "Uncertainty and the Welfare Economics of Medical Care," in the American Economic Review. George Akerlof later used the term asymmetric information in his 1970 The Market for Lemons. Akerlof noticed that, in such a market, the average value of commodities tends to decline, even for the quality of perfectly good, because the buyer has no way of knowing whether the products they buy will be a "lemon" (a defective product) .

Opportunity cost

Although the opportunity cost (opportunity cost) is sometimes difficult to quantify, the effect of opportunity cost is universal and very real at the individual level. In fact, this principle can be applied to all decisions, and not just economic. Since its appearance in the work of a German economist named Freidrich von Wieser, opportunity cost is seen as the basis of the theory of marginal value.

Opportunity cost is one way to measure the cost of something. Rather than merely identifying and adding costs to the project, but also identify alternative ways to spend an equal amount of money. The advantage would be lost as a result of the next best alternative is the opportunity cost of the first choice. A common example is a farmer who chooses to farm his land rather than rent it to neighbors. Thus, the opportunity cost is the forgone profit from renting. In this case, the farmer may expect to obtain greater benefits from the work he did himself. Likewise with the university to enter the lost wages that would be acceptable if you choose to be workers, who compared the cost of tuition, books, and other necessary goods (as the total cost of attendance at the university). Another example is the opportunity cost of a vacation in the Bahamas, which may be the money for mortgage payments.

Please note that the opportunity cost is not the number of available alternatives, but rather the benefit of a best alternative. Possible opportunity costs of the city's decision to build the hospital on vacant land are the loss of land for a sporting center, or inability to use the land for a parking space, or money that can be gained from selling the land, or loss of other uses - diverse - but not the aggregate of all (ditotalkan). The real opportunity cost, an advantage that will be lost in the largest number among the alternatives that have been mentioned earlier.

One question that arises here is how to calculate the benefits of alternatives is not the same. We must determine a dollar value associated with each alternative to facilitate comparison and assess opportunity cost, which may be more or less difficult depending on the things we are comparing. For example, many decisions involve environmental impacts whose dollar value is difficult to assess because of scientific uncertainty. Valuing a human life or the economic impact of oil spill in Alaska, will involve making subjective choices with ethical implications.