Md.
Atiqul Islam
PhD (UK), MSc (UK)
Associate Professor
Department of Economics
Lecture 2: Basic Concept of Economics…..continued
Course 1211: Economics
3 September 2018
Laws of Economics
• …are supposed to govern and explain all economic activities.
• Economic laws are statements of uniformities which govern
human behaviour concerning the utilisation of limited
resources for the achievement of unlimited ends.
• But its nature is not precise.
• “other things being equal” (ceteris paribus)
• Hypothetical or conditional
• Lack of predictability
Basic Assumptions of Economics
• Consumer act in a rational manner.
• Consumer tests remain unchanged for a fairly long period of time.
• Perfect competition on which the working of a competitive
economy stand.
• The concept of equilibrium
Different Economic System
• Capitalism or Capitalistic Economic System.
• Socialism.
• Mixed Economic System.
• Islamic Economic System
Capitalism
• Features of Capitalism
1) Right of private property
2) Freedom of enterprise
3) Freedom of choice by the consumers
4) Profit motive
5) Class-conflict
6) Un-co-ordinated nature
7) Vital role of entrepreneur
8) Competition
9) Importance of price
10) Economic inequality
Merits of Capitalism
1) Automatic working
2) Higher efficiency and incentive to hard work
3) Higher rate of capital formation
4) Economic development and prosperity
5) Optimum utilisation of resources
6) Adaptability
Demerits of Capitalism
1) Wasteful competition
2) Human welfare ignored
3) Economic instability and unemployment
4) Class-conflict
5) Social injustice and economic inequality
6) Emergence of monopolies and concentration of economic power
Socialism
• Features of Socialism
1) Social ownership of means of production
2) No private enterprise
3) Economic equality
4) Equality opportunity
5) Economic planning
6) Social welfare and social security
7) Classless society
Merits of Socialism
1) Social justice
2) Better allocation of resources
3) Rapid economic growth
4) Improving productive efficiency
5) Social security and welfare
6) Economic stability
Demerits of Socialism
1) Bureaucracy and red tapism
2) Misallocation of resources
3) Loss of consumer sovereignty
4) Lack of incentives
5) Concentration of power in the state
6) Loss of personal liberty
Mixed Economy
• Features of Mixed Economy
1) Co-existence of public and private sector
2) Role of price system and government direction
3) Government regulation and control of private sector
4) Consumer sovereignty protected
5) Government protection of labour
6) Control of monopoly
7) Reduction of economic inequality
Merits of Mixed Economy
• All merits of both capitalist and socialist economic system
Demerits of Mixed Economy
• All demerits of both capitalist and socialist economic system
Islamic Economic System
• In Islamic Economic System the mode of production, distribution
and exchange of wealth is determined by the Islamic Principles.
• Objectives of Islamic Economic System
1) Individual Freedom
2) Harmony in Moral and Material Development
3) Co-operation and Establishment of Justice
• Features of Islamic Economic System
1) Private property and its limits
2) Equitable Distribution
3) Zakat and Social Welfare
4) Interest-free economy
5) Correlation among Economic, Political and Social Orders
Economic System
An economic system is a system that involves the production, distribution
and consumption of goods and services between the entities in a particular
society. The economic system is composed of people and institutions,
including their relationships to productive resources, such as through the
convention of property. In a given economy, it is the systemic means by
which problems of economics are addressed, such as the economic
problem of scarcity through allocation of finite productive resources.
Examples of contemporary economic systems include capitalist systems,
socialist systems, and economic system of Islam. Economic systems are the
economics category that includes the study of respective systems.
Tentative questions
• Define Economics.
• What are the fundamental problems of every society?
• What is micro and macro economics?
• What are the basic assumptions of economics?
• What is capitalism/socialism? Discuss its advantages and disadvantages?
• Define mixed economic system. Discuss its advantages and disadvantages?