Download Chapter # 3 Consumption & Production

Chapter # 3
Consumption
&
Production
Chapter`s Outlines
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Consumption
Meaning and its Importance
Islamic Principles of consumption
Western and Islamic concept of consumer
behavior
Production
Meaning and Islamic approach of Production
Concept of private Ownership
Tenancy & its types
Meaning and Importance
• In economics, consumption stands for
expending of wealth for satisfaction of human
wants such as food, clothing, housing, other
articles of daily use, education, health, other
personal or family needs, etc.
• So, it is absolutely necessary that one should be
very careful in the consumption of wealth as
wants are unlimited
• Islam, therefore, enjoins moderation, self-control
and carefulness in spending of wealth.
Principles of consumption
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Principle of Lawfulness
Principle of cleanliness
Principle of moderation
Principle of benefit
Principle of morality
Principle of maximum welfare
Principle of trust (we are trustee of money)
Consumer behavior
1 The western concept of
Consumer Behavior
2 The Islamic concept of
Consumer Behavior
The western concept of
consumer behavior
• After the establishment of western
capitalist system, the concept of
consumer behavior was formulated on
two principles
• 1 Economic Rationalism
• 2 Utilitarianism
• Economic Rationalism
It implies human behavior
which is adopted to achieve Economic
success
WHILE
Utilitarianism is the basis of moral
values, like honesty is useful because
its establishes credibility in the market
etc.
Two stages of consumer behavior
1 In the first stage, which is called Cardinal
Approach to utility under which utility is
measured and consumer achieves equilibrium
according to the following formula
Mu1 = Mu2 =……..Mun
P1
P2
Pn
2 The second stage is the modern stage which
is called Ordinal Utility approach, according to
this view point the consumer attains
equilibrium when
Marginal Rate of Substitute= Price Ratio
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The Islamic concept of Consumer
Behavior
• The behavior of a Muslim consumer is
determined by Islamic rationalism which
is based on three concepts
1 The concept of life hereafter
2 The concept of wealth in Islam
3 The concept of success in Islam
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The concept of life hereafter
• In concept of life hereafter The utility
has two aspects; WORLDLY &
ETERNAL, this can be shown in the
following equation
U= U1+U2
where U = total utility,
U1= Worldly utility
U2= Eternal utility
The concept of wealth in Islam
• The concept of wealth in Islam is quite different from the
concept of wealth in capitalism.
• In Islamic perspective the consumer is a trustee of the
wealth given to him by Allah. So he is bound to spend it
according to the laws promulgated by Him.
• Believe in Allah and His Messenger (blessings and peace be
upon him) and spend (in His cause) out of that (wealth) in
which He has made you His vicegerents (and trustees). So
those of you who believe and spend (in His Way) for them is
mighty reward. [ Al-Hadeed 57 ; 7]
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The concept of success in Islam
• From the point of view of Islam, success does not lie in
amassing the wealth, but in achieving the favor of Allah.
• So Muslim consumer uses his income in two ways
1 Spending for his personal needs
2 Spending in the way of Allah
And (these) are the people who are neither extravagant nor
miserly when they spend. And their spending is (based on) a
balance between the two extremes (of extravagance and
miserliness). [ Al-Furqan 25; 67]
Cont`d…
Islamic rationalism has following effects.
a) Demand for unlawful goods & services will be
zero
b) Demand for luxury goods will be limited
c) Due equitable distribution of wealth the
demand for comforts goods will increase
d) The decline in the demand of luxury goods will
release funds which can be spent on welfare of
people, such as education, health, roads,
parks etc,,
Equilibrium of Muslim Consumer
• Muslim consumer will reach at an
equilibrium where he can gain maximum
well being. This concept of well being
combines both temporal and eternal
utilities.
• We use the term “Final spending” which
combines both expenditures.
Graphical Presentation..???
PRODUCTION
Introduction & Meaning
• It is said that just as man cannot destroy matter(‫)ماده‬, he
also cannot create matter. What he can do is to give it
utility or value by arranging or re-arranging its particles in a
particular way. Production as such may be defined as
creation of utilities and adding value to utilities.
• According to Fraser, “if consuming means extracting utility
from, production means putting utility into.”
• Allah is real creator. Man can merely change the forms of
matter and use it to satisfy his wants.
Islamic concept of Production
• The desire of man for possession of
wealth is quite natural. Man is fond of gold
and silver and other sources of wealth
which he needs perhaps to satisfy his
unending wants.
• Islam has not discouraged man to acquire
wealth. In fact, we are told by the Qur’an,
that everything of this world has been
created for the service and use of man
• Man’s struggle for acquiring wealth has also been
encouraged.
Qur’an says: “And that man hath
only that for which he make effort, and that his effort will be
seen, And afterward he will be repaid for it with fullest
payment; -----(Al-Najam : 39-41)
• The following tradition of Prophet Muhammad (PBUH)
also approve man’s struggle for earning of livelihood:
The Holy Prophet (sws) said, “Acquisition of lawful
livelihood is the most important obligation after the obligation
of prayer”.
Islamic approach to Production
1 Demand of Nature
2 The demand of the conquest of
Nature
3 Abundance of provisions
4 Demand for gratitude (thankfulness)
5 Progress of Arts and Science
RIGHTS & LIMITS OF
OWNERSHIP IN ISLAM
The Rights of ownership in Islam
1 The real Nature of ownership
a)
b)
c)
d)
e)
Trust
Demand of vicegerency on Earth
Open to General Use
Trial
Acting upon the commands of Shariah
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a)
b)
c)
d)
e)
The Right of Individual Ownership
Private business
Shirkah
Limited Partnership
Rent
The right to transfer ownership
1 By sale
2 By Hiba
3 By Will
f) The right to protect property
g) The right to accumulate wealth
Prohibited Means/ Limitation of Production
of Wealth
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Interest
Bribery
Usurpation of Orphan’s Property
Trade in Wine and Narcotics
Gambling and Games of Chance
Hoarding of Essential Goods
Embezzlement
Wrong Measuring and Weighing
Prostitution
Begging
Miscellaneous Unfair Means
TENANCY (MUZARAT)
Meaning & Definition of Tenancy
• The word Muzarat is derived from “zara”
which means “ to sow the seed”
• Technically it is defined as a transaction in
which the owner of agriculture land gives his
land to another for cultivation on terms of
crops sharing at a fixed rate.
• Definition
Muzarat is a contract made for the
cultivation of land on the basis of crop sharing
at a certain rate
Types of Tenancy
• Tenancy is of two types:
1 Share-Tenancy
In share tenancy the tenant and the
landlord share the produce of the land in
agreed proportions.
2 Cash- Tenancy
In cash tenancy the tenant pays the
fixed rent of the land to the land owner in
cash.
thx