CH 4 ISLAMIC MICROECONOMICS (Oligopoly (A market where the supply of one…
CH 4 ISLAMIC MICROECONOMICS
Islamic firm under different market conditions -
A market where large number of seller or firms exist.
No single firm can influence the price
Produce goods at minimum cost
Refrain from producing luxury goods – supplying social need items at low price
Emphasis on the justice, thoughtful and concern about the social welfare
A market where the supply of one type of goods is controlled by several big firms.
The number of firms in the market is more than two but less than ten
Due to their power in influencing the market makes its extremely difficult for the new firms to enter the market
Usually the firms enjoy the profit by setting a limited price rather than causing price competition
Exploitation can happen when firms collude with each other and having a price leader
Damage can occur if exploit happen
The firms will make efforts to attract the consumers by doing an advertisement, benefit
E.g. : Petron card
Price determination is one of the practices that is not allowed by Islamic shariah.
Prophet Nabi Muhammad said that :
“Allah is the one who really determines the price, who revokes, expands and the risky giver. I hope that when meeting Allah there
is no one among you who demands me about the existence of tranny in matter of blood and property.”
If the market condition is not fair, the government can set a price with the
aim of needs of the community and safeguarding from exploitation or greedy acts.
E.g. : Petrol Industry
In islamic view monopoly is a prohibited practice in islam because it leads to injustice
The prophet Muhammad S.A.W has made specific statement about it :-
“whoever strives to increase the cost (of service) ,
Allah will seat him in the center of the fire on the Day of Resurrection.” – Ahmad and al-Hakim
If the monopoly also the monopolistic, exploitation will happen which is prohibited in islam.
Imam Yahya an-Nawawi said :“the wisdom behind prohibiting monopolistic practice is to prevent the harm that would befall people as a result. Scholars are in agreement that if a person possesses items
that people are in dire need of and they can not find anyoneelse to supply it,
he is to be forced to sell it in order to lessens the harm remove difficulty from people”.
In islamic firm, they concern about the social welfare and justice of the consumer.