📘 Adam Smith’s Definition (5 Marks)

“Economics is an inquiry into the nature and causes of the wealth

of nations.”

Explanation:

Adam Smith, known as the Father of Economics, gave the classical

definition in his famous book “The Wealth of Nations” (1776). His focus
was on how wealth is created and distributed in a country.

Main Features:

 Economics is a study of wealth only.

 It tells us how nations can increase their wealth.’

 The focus is on production and accumulation of goods.

Criticism:

This definition ignores human welfare and focuses too much on wealth.

📗 Alfred Marshall’s Definition (5 Marks)

“Economics is a study of mankind in the ordinary business of

life.”

Explanation:

Alfred Marshall gave this welfare-oriented definition in his book

“Principles of Economics” (1890). He shifted economics from being a
science of wealth to a science of human welfare.

Main Features:

 Focuses on human beings, not just wealth.

 Deals with daily life economic activities.

 Wealth is a means, not the end.

 Economics is a social science.

Importance:

This definition made economics more relevant to human life and

society.
📙 Lionel Robbins’ Definition (5 Marks)

“Economics is the science which studies human behaviour as a

relationship between ends and scarce means which have
alternative uses.”

Explanation:

Robbins gave this scarcity-based definition in 1932. He focused on how

people make choices when resources are limited.

Main Features:

 Ends (wants) are unlimited.

 Means (resources) are scarce.

 Resources can be used in different ways (alternative uses).

 Economics is about making choices and allocating resources

efficiently.

Importance:

This definition made economics more scientific and universal, applying

to all situations involving scarcity and choice.

Concept of Utility, Utility and Scarcity:

 Utility means the satisfaction a consumer gets from consuming a

good or service.

 Total Utility is the total satisfaction from all units of a product.

 Marginal Utility is the extra satisfaction from consuming one more

unit.

Scarcity and Utility are related — because resources are limited,

consumers must make choices to maximize utility. The more scarce a
good is, the more valuable its utility becomes.

Law of Equi-Marginal Utility

The Law of Equi-Marginal Utility states that a consumer gets

maximum satisfaction by spending income in such a way that the
marginal utility per rupee spent is equal for all goods. If this is not
the case, the consumer will reallocate spending from one good to another
until equality is achieved.

Explanation:

If a person buys tea and biscuits, they will adjust their spending so that
the last rupee spent on tea gives the same satisfaction as the last
rupee spent on biscuits. This ensures the efficient use of limited
income.

Formula:

MU₁ / P₁ = MU₂ / P₂ = MU₃ / P₃

Where MU = Marginal Utility, and P = Price

Assumptions of the Law:

1. The consumer has a limited income.

2. Prices of goods are constant.

3. Marginal utility of money remains constant.

4. The consumer is rational.

5. Goods are divisible and can be consumed in small units.

Other Name:

This law is also called the Law of Substitution.

Importance:

It helps consumers maximize utility, and helps producers and

governments understand consumer choice and resource allocation

Forms of Changes in Demand

Changes in demand refer to a change in the quantity demanded without

any change in price. These occur due to non-price factors like income,
taste, fashion, population, or future expectations, causing the entire
demand curve to shift.

 Increase in Demand: When people buy more of a product at the

same price, due to reasons like higher income, popularity, or
health awareness. Example: More people start drinking milk for
health, shifting the demand curve right.

 Decrease in Demand: When people buy less of a product at the

same price, due to lower income, changing preferences, or better
 substitutes. Example: People stop drinking fizzy drinks for health,
shifting the demand curve left.

In short, demand changes when factors other than price affect

consumer behavior.

Elasticity of Demand (5 Marks)

Elasticity of demand shows how much the quantity demanded changes

when there is a change in price, income, or the price of related goods.
If demand changes a lot with a small price change, it is called elastic
Demand. If demand changes very little, even when the price changes
significantly ,it is inelastic Demand

Formula:

Price Elasticity of Demand (PED) =

% Change in Quantity Demanded ÷ % Change in Price

 If the Price Elasticity of Demand (PED) is greater than 1, demand

is elastic, meaning consumers are highly responsive to price changes — a
small change in price causes a larger change in quantity demanded.

 If the Price Elasticity of Demand (PED) is less than 1, demand is

inelastic, meaning consumers are not very responsive to price changes
— a change in price causes a smaller change in quantity demanded.

Elasticity helps in price decisions and tax planning. Major types are:

1. Price Elasticity

2. Income Elasticity

3. Cross Elasticity

a) Definition of Supply (5 Marks)

Supply refers to the quantity of a good or service that a producer is

willing and able to offer for sale at a given price in a specific time
period. It shows the seller’s behavior in the market.

b) Law of Supply (5 Marks)

The Law of Supply states that there is a direct relationship between

price and quantity supplied.
According to the Law of Supply, when the price of a good increases, the
quantity supplied also increases, and when the price decreases, the
quantity supplied decreases — provided all other factors remain constant
(ceteris paribus).

Explanation:
Producers are more willing to supply goods when prices are higher
because it brings them more profit. If prices fall, they reduce supply to
avoid losses.

Example:
If the price of wheat rises from Rs. 40 to Rs. 50 per kg, farmers will be
encouraged to supply more wheat.

Forms of Changes in Supply

Supply can change even if the price stays the same, due to other
external factors.

Changes in supply can be of two types:

1. Increase in Supply – More quantity is supplied at the same price.

✅ This causes the supply curve to shift to the right.

2. Decrease in Supply – Less quantity is supplied at the same price.

❌ This causes the supply curve to shift to the left.

These changes are caused by non-price factors such as technology,

input costs, weather conditions, or government policies.

d) Elasticity of Supply (5 Marks)

Elasticity of supply shows how much the quantity supplied

changes when there is a change in the price of the good.

If the supply changes a lot with a small change in price, it is

called elastic supply. But if the quantity supplied changes very
little, even when the price changes significantly, it is called
inelastic supply.

Formula:
Elasticity of Supply (Es) =
% Change in Quantity Supplied ÷ % Change in Price

 If elasticity of supply is greater than 1, supply is elastic — producers

respond more to price changes.
 If elasticity of supply is less than 1, supply is inelastic — producers
respond less to price changes.

It helps businesses understand how quickly they can respond to price

changes.

Market and Its Types

1. What is a Market?

A market is any place or system where buyers and sellers interact to

exchange goods and services at agreed prices. It can be a physical
place, like a shop or bazaar, or non-physical, like online platforms or
stock markets.

2. What is Revenue? Explain its Types.

Revenue is the income a firm earns by selling goods or services. It is

important for calculating profit and making business decisions.
There are three types of revenue:

 Total Revenue (TR) = Price × Quantity Sold

 Average Revenue (AR) = TR ÷ Quantity Sold

 Marginal Revenue (MR) = Change in total revenue from selling

one more unit

3. What is Perfect Competition?

Perfect competition is a market where there are many buyers and

sellers, and no single firm can influence the price. All firms sell identical
products, and prices are set by demand and supply.

Features of Perfect Competition:

 Large number of sellers

 Homogeneous (same) products

 Free entry and exit

 Perfect knowledge among buyers and sellers

 Firms are price takers, not price makers

Example
Agricultural Markets
In markets like wheat or rice, there are many sellers selling identical
products. No single farmer can influence the market price — all are price
takers. This is a real-world example of near-perfect competition.

4. What is Imperfect Competition?

Imperfect competition is a market where some firms can control

prices, and products are not identical. It is more common in real life
than perfect competition.

Types of Imperfect Competition:

 Monopoly (one seller)

 Monopolistic Competition (many sellers, similar but not identical

products)

 Oligopoly (few large sellers)

Features of Imperfect Competition:

 Fewer sellers than perfect competition

 Product differentiation

 Some control over prices

 Barriers to entry for new firms

 Lack of perfect knowledge

Example

Mobile Phone Market

Companies like Apple, Samsung, and Xiaomi sell different models with
different features. They have some control over price due to brand
loyalty, advertising, and product differences. This is a clear example
of monopolistic competition, a type of imperfect market.

5. What is Monopoly?

A monopoly is a market structure in which only one seller controls the

entire supply of a product or service, and there are no close substitutes.
The firm becomes a price maker.

Examples: WAPDA, Pakistan Railways

Causes of Monopoly:

 Legal rights (patents, licenses)

  High capital investment

 Natural advantages (e.g., control of resources)

Features of Monopoly:

 Single seller

 No close substitutes

 Full control over price

 Barriers to entry

 Price discrimination possible

 Abnormal profits in the long run

Market and Equilibrium

a) Concept of Equilibrium (5 Marks)

Equilibrium in economics means a situation where demand and supply

are equal. At this point, the quantity of goods demanded by buyers
equals the quantity supplied by sellers, and there is no tendency
for price to change.
In short, it is a stable point where the market is balanced.

b) Equilibrium of Demand and Supply (5 Marks)

The equilibrium of demand and supply occurs where the demand

curve intersects the supply curve. At this point, both consumers and
producers agree on the same price and quantity.

 If demand is greater than supply, price rises.

 If supply is greater than demand, price falls.

 At equilibrium, demand equals supply.

c) Equilibrium Price (5 Marks)

Equilibrium price is the market price at which the quantity
demanded equals quantity supplied. It is determined through the
interaction of buyers and sellers in the market.
At this price:

 There is no surplus or shortage

 The market is in balance

Formula-based concept (optional for board):

When Quantity demanded = Quantity supplied, the price is said to be in
equilibrium.

d) Effects of Change in Supply and Demand on Equilibrium (5

Marks)

Changes in supply or demand cause the equilibrium price and

quantity to shift.

1. Increase in demand → higher price & quantity

2. Decrease in demand → lower price & quantity

3. Increase in supply → lower price, more quantity

4. Decrease in supply → higher price, less quantity

These changes create a new equilibrium point in the market.

A) Concept of Development (5 Marks)

Economic development refers to the improvement in living standards,

higher income, better health and education, and reduction of poverty. It
includes both economic growth and social progress, aiming to improve the
overall quality of life.

b) Characteristics of Underdeveloped Countries (5 Marks)

1. Low income and high poverty

2. High population growth

3. Unemployment and underemployment

4. Poor health and education

5. Dependence on agriculture

These issues slow down development and affect people’s quality of life.
c) Inflation (5 Marks)

Definition:
Inflation is a general increase in the prices of goods and services over
time, which leads to a decrease in the value of money.

Causes:
It occurs due to high demand for goods (demand-pull inflation),
increased production costs like wages and raw materials (cost-push
inflation), and when too much money is in circulation.

Effects:
Inflation reduces purchasing power, especially for people with fixed
incomes or savings. It also creates uncertainty, discourages savings
and investment, and can increase inequality.

d) Balance of Payment (5 Marks)

Balance of Payment (BOP) is a record of all economic transactions with

other countries in a year.
It includes exports, imports, loans, aid, and remittances.

 If a country imports more than it exports, it has a Balance of

Payments (BOP) deficit, meaning more money is going out of the
country than coming in.

 If a country exports more than it imports, it has a Balance of

Payments (BOP) surplus, meaning more money is coming into
the country than going out.

e) Public Debt (5 Marks)

Public debt is the money the government borrows to meet its expenses
when its income is not enough. It is usually taken for development
projects or to cover deficits.

There are two main types:

 Internal debt – borrowed from within the country (e.g., banks,

citizens)

 External debt – borrowed from foreign sources like the IMF or

World Bank
If public debt becomes too high, the government may have to spend more
on interest payments, leaving less money for development, education, or
health.

a) Definition of Public Finance (5 Marks)

Public finance is the study of income and expenditure of the

government. It deals with how the government collects revenue
through taxes and spends money on public services like education,
health, and defense. It helps to manage the economic stability of the
country.

b) Comparison Between Public and Private Finance (5 Marks)

Public Finance Private Finance

Related to government income & Related to individual or business

spending finance

Aim is welfare of society Aim is personal profit or satisfaction

Can print money or borrow easily Limited to income and savings

Decisions are open to public Decisions are personal and private

c) Importance of Public Finance (5 Marks

Public finance is important for:

1. Running government services (health, education, defense)

2. Reducing income inequality through taxes and subsidies

3. Economic stability by managing inflation and unemployment

4. Development projects like roads, dams, schools

5. Crisis management (natural disasters, pandemics, etc.)

d) Public Revenue (5 Marks)

Public revenue is the income received by the government from various

sources to meet its expenses and run the country.

Sources of Public Revenue:

• Tax Revenue – Income from taxes like income tax, sales tax, customs
duty, etc.
• Non-Tax Revenue – Includes income from fees, fines, interest,
donations, and profits from government-owned businesses.

e) Taxes (5 Marks)

Taxes are compulsory payments made by individuals and businesses to

the government without any direct benefit in return. They are the main
source of public revenue used to fund public services like education,
healthcare, and infrastructure.

• Classification of Taxes:

1. Direct Taxes: Paid directly by individuals (e.g., income tax)

2. Indirect Taxes: Collected indirectly through goods/services (e.g.,

sales tax)

• Merits of Indirect Taxes:

 Easy to collect

 Wide coverage

 Less chance of tax evasion

• Demerits of Indirect Taxes:

 Regressive (affect poor more)

 Increase cost of living

 Can reduce consumption

Paragraph form:

 Indirect taxes are taxes imposed on goods and services rather than on income or
profits. They have several merits. First, they are easy to collect since they are
included in the price of goods. They also have wide coverage, as everyone who
purchases taxed goods contributes. Additionally, there is less chance of tax evasion
because the tax is collected at the point of sale.
 However, indirect taxes also have some demerits. They are considered regressive,
meaning they affect poor people more than the rich, as everyone pays the same rate
regardless of income. These taxes also increase the cost of living and may reduce
consumption, especially of essential items, which can hurt overall welfare.
Canons (Principles) of Taxation – Adam Smith (7 Marks)

Adam Smith suggested that a good tax system should follow four basic
principles, called canons of taxation:

1. Canon of Equity:
Tax should be fair and based on a person’s ability to pay. Rich
people should pay more, and poor less.

2. Canon of Certainty:
The taxpayer should know how much tax to pay, when, and
how. There should be no confusion.

3. Canon of Convenience:
Tax should be easy to pay, collected at a time and method that
suits the taxpayer (like deducting income tax from salary).

4. Canon of Economy:
The cost of collecting tax should be low, so most of the money
goes to the government, not into administration.

• Theory of Zakat:

Zakat is an Islamic system of wealth distribution in which Muslims give a

fixed portion of their savings (usually 2.5%) annually to the poor, needy,
and other eligible categories. It is both a moral obligation and a religious
duty, aiming to purify wealth and promote economic justice. Zakat
reduces poverty, supports social welfare, and prevents wealth from
concentrating in a few hands.

a) Barter System of Exchange & Its Difficulties (5 Marks)

The barter system is an old method of exchange where goods were

traded for goods without using money.
Difficulties of Barter System:

1. Lack of double coincidence of wants

2. No common measure of value

3. Difficulty in storing wealth

4. Problem in dividing goods

5. No standard for deferred payments

b) Definition, Evolution & Functions of Money (5 Marks)

Money is anything that is generally accepted as a medium of

exchange.
Evolution of Money

Money began with the barter system, where goods were exchanged
directly. Later, people used commodity money like gold and salt. This
was followed by coins, then paper currency, and now we mostly use
digital and electronic money.

Functions of Money

Money works as a medium of exchange, a measure of value, a store

of value, and a standard of deferred payments. These functions make
money essential for trade, saving, and future payments.

c) Qualities of Good Money (5 Marks)

Good money should have the following qualities:

1. Durability – should not spoil or wear out

2. Divisibility – easy to divide into small units

3. Portability – easy to carry

4. Stability – value should remain stable

5. Acceptability – widely accepted in transactions

6. Uniformity – each unit should be same as another

d) Paper Money – Merits & Demerits (5 Marks)

Paper money is currency in the form of notes issued by the

government or central bank.

Merits:

 Easy to carry

 Cost-effective to print

 Convenient for large payments

 Easily stored and counted

Demerits:
  Can be easily destroyed

 Can be over-issued, causing inflation

 Not accepted in other countries

 Not backed by physical value like gold

Paragraph

Merits of Paper Money

Paper money is easy to carry, simple to store, and convenient for

making large payments. It is also cost-effective to print and can be
easily counted, making it very useful in daily transactions and large-
scale trade.

Demerits of Paper Money

Despite its advantages, paper money has some drawbacks. It can be

easily destroyed by fire or water. If over-issued, it may cause
inflation. It is not accepted internationally, and unlike gold, it is not
backed by any physical asset, which can reduce confidence in its
value.

e) Value of Money (5 Marks)

The value of money refers to its purchasing power, i.e., how much
goods and services money can buy.
If prices rise, the value of money falls (inflation).
If prices fall, the value of money increases (deflation).

f) Quantity Theory of Money (5 Marks)

This theory explains the relationship between the quantity of money

and the price level.
Given by Irving Fisher:

MV = PT
Where:

 M = Money supply
  V = Velocity of money

 P = Price level

 T = Volume of transactions

If money supply increases, prices tend to rise.

g) Inflation – Control of Inflation (5 Marks)

Inflation is the general rise in prices over time.

Causes:

 More demand

 Costly production

 Increase in money supply

Control Measures:

1. Monetary policy – raise interest rates

2. Fiscal policy – reduce government spending

3. Increase production

4. Reduce money supply

h) Effects of Change in the Value of Money (5 Marks)

When the value of money changes, it affects the entire economy:

If value falls (inflation):

 Hurts fixed income groups

 Reduces savings

 Raises cost of living

If value rises (deflation):

 Reduces demand

 Causes unemployment

 Slows down economic growth

. Write a detailed note on National Income.

a) Meaning

National Income refers to the total income earned by the people of a

country during one year from all economic activities. It includes wages,
rent, interest, and profits received by individuals and businesses. It shows
the economic progress and standard of living in a country.

b) Gross National Product (GNP)

GNP is the total market value of all final goods and services produced by a
country’s citizens, whether working inside or outside the country, in one
year. It includes income earned abroad, but excludes income earned by
foreigners inside the country.

c) Gross Domestic Product (GDP)

GDP is the total value of final goods and services produced within the
country’s borders, regardless of who produces them. It includes
production by both citizens and foreigners inside the country, but does not
include income from abroad.

d) Net National Product (NNP)

NNP is calculated by subtracting depreciation (wear and tear of capital

goods) from GNP.

NNP = GNP – Depreciation

It shows the actual net production of the country after accounting for the
loss in machinery or equipment.

e) National Income (NI)

National Income is the net income earned by the citizens of a country,

both inside and outside, after deducting indirect taxes and depreciation. It
includes all payments made to factors of production like wages, rent,
interest, and profits.

f) Per Capita Income (PCI)

Per capita income is the average income per person in a country in one
year.
PCI = National Income ÷ Total Population
It helps compare the standard of living of people within or between
countries.

g) Disposable Personal Income (DPI)

DPI is the amount of money that people actually get to spend or save after
paying taxes.

DPI = Personal Income – Taxes

It reflects the true income available for individuals to use.

h) Measurement of National Income

There are three main methods to measure national income:

 Production Method – Adds the value of all goods and services

produced.

 Income Method – Adds all incomes (wages, rent, interest, profit)

earned.

 Expenditure Method – Adds all expenses made by households,

businesses, and government.

All methods aim to calculate the same final figure if done accurately.

i) National Income of Pakistan (Last Three Years)

According to the Economic Survey of Pakistan (approx.):

 2022–23: Rs. 84.7 trillion

 2021–22: Rs. 66.6 trillion

 2020–21: Rs. 55.8 trillion

These figures show growth in economic activity over the years.

Conclusion

National Income is a key indicator of a country’s economic strength and

well-being. By understanding different forms of national income,
governments can make better economic policies and decisions.
Q. What are the Factors of Production?

Factors of production are the basic resources used to produce goods and
services. There are four main factors: Land, Labour, Capital, and
Enterprise. Each plays an important and unique role in the production
process.

1. Land:

Land refers to all natural resources used in production, such as soil,

water, forests, sunlight, and minerals. It is a free gift of nature and
has a limited supply. Land cannot be moved from one place to another.
For example, a farmer uses land to grow crops.
➡ The income earned from land is called rent.

2. Labour:

Labour means all human efforts used in production, both physical (like
a worker) and mental (like a teacher or engineer). Labour is done in
exchange for wages. The quality of labour depends on a worker’s health,
education, and skills.
➡ Labour is an active factor because it applies efforts to other
resources.

3. Capital:

Capital includes all man-made goods used in production such as tools,

machines, and buildings. It is not used for direct consumption but to
produce other goods. Capital is created through saving and
investment.
For example, a tailor uses a sewing machine to stitch clothes.
➡ The return on capital is called interest.

4. Enterprise (Entrepreneur):

An entrepreneur is the person who organizes land, labour, and capital

to start and manage a business. He takes the risk of loss but earns
profit if the business succeeds.
For example, someone who opens and runs a shop is an entrepreneur.
➡ The reward of enterprise is called profit, and it depends on the
success of the business.
Conclusion:

These four factors—land, labour, capital, and enterprise—are

essential for production. If even one of them is missing, production cannot
take place. Each factor has its own role and reward, and all work
together to create goods and services.

Q. What is the Law of Demand? Write a detailed note.

Definition:

The Law of Demand states that when the price of a good falls, the
quantity demanded increases, and when the price rises, the quantity
demanded decreases, other factors remaining constant (ceteris paribus).

In simple words, there is an inverse relationship between the price and the
quantity demanded of a good.

Explanation:

This law is based on common sense and consumer behavior. When the
price of a product becomes cheaper, people are more likely to buy it. But
if the price increases, people reduce their purchases or shift to cheaper
alternatives.

Example:

If the price of sugar is Rs. 100 per kg, people may buy only 2 kg.
If the price falls to Rs. 80 per kg, they may buy 3 or 4 kg.
This shows that as price decreases, demand increases.

Assumptions of the Law:

The law of demand is true only when the following things remain
unchanged:

1. Income of the consumer remains the same.

2. Taste and preferences of the consumer do not change.

3. Prices of related goods (substitutes or complements) stay the same.

4. There is no expectation of future price change.

 5. The population size and distribution remain constant.

Exceptions to the Law of Demand:

There are some cases where the law may not apply:

1. Giffen goods – inferior goods where people buy more even if price
increases.

2. Necessities – like salt, rice, or medicine; people buy them

regardless of price.

3. Luxury goods – some people buy expensive items to show status.

4. Future expectations – if people expect prices to rise, they may

buy more now.

5. Emergency situations – in war or panic, demand may not follow

usual behavior.

Conclusion:

The Law of Demand is a basic principle of economics. It helps in

understanding consumer behavior and is useful in price setting, business
decisions, and market analysis.

Q. Explain the Law of Diminishing Marginal Utility.

Definition:

The Law of Diminishing Marginal Utility states that as a person consumes

more and more units of a good, the additional satisfaction (marginal
utility) received from each new unit starts to decrease.
In simple words, the first unit of a good gives the most satisfaction, but as
we keep consuming more, the extra satisfaction becomes less.

Example:

Suppose a person is eating bananas:

 1st banana gives high satisfaction.

 2nd gives a little less.

 3rd gives even less.

  4th may give no satisfaction or may feel boring.

This proves that marginal utility decreases as we consume more.

Assumptions of the Law:

 All units of the good are same in quality and size.

 The good is consumed continuously without gap.

 Taste of the consumer remains constant.

 The consumer is rational and wants to maximize satisfaction.

Exceptions / Limitations of the Law:

The law may not apply in the following cases:

 Rare collections: In stamp or coin collecting, satisfaction may

increase with more.

 Addictions: In case of drugs or smoking, utility may not decrease.

 Emotional goods: Some items like gifts or photos may always give
the same satisfaction.

 Change in taste: If a person’s taste changes, utility may increase

again.

Conclusion:

The Law of Diminishing Marginal Utility is important to understand

consumer behavior. It explains why people are not willing to pay the same
price for more units of the same good. It is also the base of the Law of
Demand.

a) Capitalism (Free Market Economy):

Capitalism is an economic system where all the resources like land,

factories, and businesses are privately owned. People are free to make
their own economic decisions such as what to produce, how to produce,
and for whom to produce. The prices of goods and services are
determined by demand and supply in the market, and the main aim of
businesses is to earn profit. Consumers also have freedom of choice,
meaning they can buy whatever they want from the available options.
There is competition among producers, which leads to better quality and
efficiency. The government plays a very limited role, only to maintain law
and order and protect property rights.

b) Socialism (Planned or Command Economy):

In socialism, all the major means of production such as factories, land, and
natural resources are owned and controlled by the government. The
government makes all the economic decisions through central planning,
including what goods to produce, in what quantity, and at what price. The
goal of socialism is to reduce inequality and ensure the welfare of all
people. There is no concept of private profit in key sectors. The system
promotes equal distribution of wealth, provides free education, health,
and basic needs, and avoids waste of resources by preventing duplication
and overproduction.

c) Mixed Economic System:

A mixed economy is a system that combines the features of both

capitalism and socialism. In this system, some industries are owned by
private individuals while others are under government control. People
have the freedom to run businesses, but the government regulates certain
important sectors like education, health, and transport to ensure public
welfare. The mixed system tries to reduce the gap between rich and poor
by using tools like taxation, subsidies, and social welfare programs. It
promotes both profit and fairness, allowing the economy to grow while
also protecting the interests of the poor.

d) Islamic Economic System:

The Islamic economic system is based on the teachings of the Holy Quran
and Sunnah. It promotes a balance between individual freedom and social
justice. In this system, people are allowed to own property and run
businesses, but they must follow Islamic rules. Interest (Riba) is
completely prohibited, and earning money through unethical or haram
(forbidden) means is not allowed. The system strongly encourages charity
(Zakat) to help the poor and needy. Trade should be done with honesty
and fairness, and workers should be treated justly. The goal of the Islamic
system is to create a society that is free from exploitation, injustice, and
poverty.
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