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Volume :20 Issue : 3 1992      Add To Cart                                                                    Download

Towards a Theoretical and Mathematical Formulation of the Theory of Price Mechanism in Islam

Auther : Yousef A.Al-Zamel , Boualem Bend Jilali

The main objective of this paper is the formulation of a price mechanism governed by Islamic norms. First, it brings up the limitations of the capitalistic economy in showing that the main variables of this system are mainly of a pure materialistic nature neglecting more or less those variables that are related to non-materialistic one. Second, this paper shows that the qualitative variables such as the performance of zakat shift the market demand as well as the supply curve to the right leading to a higher demand and higher supply. Third, this article models an Islamic price mechanism to indicate the ability of the Islamic society to achieve the maximum welfare without the intervention of any exogenous forces, using the performance of zakat as a particular tool. Within the context of the model it is shown that the performance of zakat is a built in variable in the utility function of the rich and poor Muslims and hence in their demands and consequently in the mechanism of the price through the excess demand.

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