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Iree market
rlvaLely owned by
lndlvlduals or Lhe
prlvaLe secLor
lndlvldual rlce mechanlsm lreedom Lo reap
proflLs and
resulLlng ln hlgh
lncenLlves Lo work
lndlvlduals and
producers have
freedom of cholce
1o maxlmlze
proflLs by
prlorlLlzlng
lndlvldual
lnLeresLs
Centra||y
p|anned
Cwned by Lhe
governmenL
CovernmenL and
cenLral plannlng
lnsLlLuLlon
CovernmenL no freedom ueLermlned by
Lhe governmenL
Lhrough cenLral
plannlng
lnsLlLuLlons
rlorlLlzes soclal
and communlLy
welfare
M|xed
lreely owned by
lndlvlduals and Lhe
prlvaLe secLor
whlle parLly owned
by Lhe governmenL
lndlvlduals and
Lhe prlvaLe secLor
(soclal goods) and
Lhe governmenL
(publlc goods)
rlce mechanlsm
(prlvaLe goods)
and Lhe
governmenL
(conLrolled and
prlvaLe goods)
lreedom Lo
produce prlvaLe
goods buL Lhe
governmenL
conLrols mlnlmum
proflL raLes for Lhe
producLlon of
publlc goods
lndlvlduals and
prlvaLe producers
have freedom of
cholce (for prlvaLe
goods) and Lhe
governmenL
makes declslons
(for publlc goods)
1o maxlmlze
proflLs (for prlvaLe
goods) and for
soclal welfare (for
publlc goods)
Is|am|c
Allah ls Lhe sole
owner man acLs as
LrusLee Lo uLlllze
naLural resources
lndlvlduals and
producers based
on lslamlc
prlnclples and
commandmenLs
Consumers and
producers (power
of Lhe markeL)
based on lslamlc
prlnclples and
commandmenLs
lreedom Lo seek
proflL provlded
LhaL lnLeresL (f)
ls noL lnvolved
lndlvlduals and
producers have
freedom of
cholce provlded
Lhere ls no
conLravenLlon of
lslamlc prlnclples
and
commandmenLs
rlorlLlzes Lhe
accumulaLlon of
proflL and soclal
welfare based on
lslamlc prlnclples
and
commandmenLs

Mer|ts Demer|ts
Iree market economy 1 ueclslons are made qulckly All economlc declslons
are made Lhrough Lhe prlce mechanlsm lor
example markeL prlces wlll rlses lf Lhere ls
lncreased demand and markeL prlces wlll fall lf
Lhere ls decreased demand
2 lncenLlve Lo work 8ecause all proflLs are prlvaLely
owned producers work hard Lo accumulaLe wealLh
ln Lhls economlc sysLem lndlvlduals are free Lo
accumulaLe as much wealLh as posslble
3 Lconomlc efflclency 1he concepL of efflclency
refers Lo Lhe maxlmum ouLpuL LhaL can be
produced wlLh llmlLed resources or lnpuL 8ecause
Lhe alm of a flrm ls Lo maxlmlze proflL Lhe flrm
musL ensure lLs producLlon ls always aL a hlgh of
efflclency
4 CompeLlLlon ln Lhls economlc sysLem flrms are
free Lo compeLe beLween Lhemselves 1hls
compeLlLlon wlll encourage Lechnologlcal
lnnovaLlon and advancemenL whlch wlll conLrlbuLe
Lo a hlgher level of saLlsfacLlon
1 Soclal welfare neglecLed Soclal welfare ls ofLen
neglecLed as flrms are focused on maxlmlzlng
proflLs Soclal responslblllLy ls ofLen forgoLLen lor
example flrms wlll sell dangerous goods such as
flreworks Lo consumers as long as consumers
demand Lhese goods
2 WasLage of resources Lxample ln a compeLlLlon
beLween flrms adverLlslng cosL musL be pald lf Lhe
adverLlsemenLs are noL effecLlve Lhe adverLlslng
cosLs are wasLed
3 Monopoly lree compeLlLlon beLween flrms may
resulL ln a monopoly 1he emergence of a
monopoly may negaLlvely lmpacL consumers
Lxample prlces may rlse cholces may be llmlLed
and goods may be of low quallLy as Lhere ls no
compeLlLlon
4 uneven dlsLrlbuLlon of lncome 1he rlch lncome
group wlll conLlnue Lo accumulaLe Lhe wealLh
whereas Lhe condlLlon of poor group wlll sLlll
remaln as lL was before
Centra||y p|anned
economy
1 Lncourages mass producLlon 1he producLlon ls up
Lo maxlmum wlLh mlnlmum usage of facLors of
producLlons
2 roducLlon wlLhouL compeLlLlon 1here wlll be a
mass producLlon deLermlned by Lhe governmenL
3 CreaLes economlc sLablllLy 1he welfare of Lhe
socleLy ls Lhe uLmosL Lechnlque of producLlon
1herefore Lhe unemploymenL ls mlnlmal or does
noL exlsL
4 rlorlLlzes Lhe producLlon of publlc or soclal goods
1he governmenL provldes more publlc goods
because Lhe economlc declslons are deLermlned by
Lhe governmenL
1 Lrrors ln declslon maklng 1he delay ln maklng Lhe
declslon by governmenL exlsLs because Lhe
moLlvaLlon of Lhe governmenL ls Lo glve prlorlLy Lo
Lhe welfare of Lhe people raLher Lhan Lhe proflL of
Lhe company
2 Lack of moLlvaLlon and lncenLlve Lo work
roducLlons are slow because of low moLlvaLlon of
Lhe producers Coods are produced as per
lnsLrucLlon of Lhe governmenL
3 uevelopmenL of Lechnology and lnnovaLlon noL
encouraged 1echnologlcal developmenL and
lnnovaLlon are slow due Lo lack of compeLlLlon ln
Lhe economy
M|xed economy 1 More opLlon/cholce 1he governmenL produces
publlc goods prlvaLe secLor produces prlvaLe
goods 1herefore more Lypes of goods wlll be
produced ln a mlxed economy compared Lo a free
markeL socleLy whlch only produces prlvaLe goods
2 LfflclenL resource allocaLlon CovernmenL and
prlvaLe secLors compeLe wlLh each oLher Lo obLaln
resources and produce goods Powever Lhe
governmenL can lnLervene lf compeLlLlon for
resources becomes unhealLhy
3 lncenLlve Lo work lndlvlduals and flrms have Lhe
freedom Lo run economlc acLlvlLles and reap
proflLs lncreased efforLs from lndlvlduals and flrms
lncrease a counLry's producLlon and producL
quallLy
4 rohlblLlon of lllegal acLlvlLles and negaLlve exLernal
lnfluences
1 uneven dlsLrlbuLlon of lncome 1he rlch lncome
group wlll conLlnue accumulaLlng Lhe wealLh
whereas Lhe condlLlon of poor group wlll sLlll
remaln poor as lL was
2 osslblllLy of markeL and economlc lnsLablllLy uue
Lo Lhe quoLa sysLem LhaL has been lnLroduced by
Lhe governmenL Lhe Lendency of mlsconducL ln
order Lo galn proflL by Lhe parLy concerned lead Lo
black markeL and prlce hlke
3 Lmergence of lllegal acLlvlLles and negaLlve exLernal
lnfluences Lx selllng Lhe prohlblLed lLems
4 osslblllLy of lnefflclency ln Lhe use of resources
Cnly few flrms lnLeresLed ln lndulglng ln soclal
acLlvlLles slnce governmenL lnLervenLlon ln buslness
acLlvlLles glves prlorlLy Lo Lhe welfare of communlLy
compared Lo moneLary galn
Is|am|c economy 1 rlorlLles safeLy and happlness 1he maln alm of
lslamlc economlc sysLem ls Lo ensure safeLy and
happlness on earLh and ln Lhe afLerllfe
2 LllmlnaLes economlc acLlvlLles havlng elemenLs of
lnLeresL (rlba)
3 rohlblLs monopolles Lach member of Lhe
communlLy (ln parLlcular Lhe weak and Lhe poor) ls
ensured Lhe necesslLles of llfe
4 Lmphaslzes happlness on earLh and ln Lhe afLerllfe
lndlvlduals are encouraged Lo seek proflL Lhrough
halal buslness le acLlvlLles LhaL do noL lnvolve
lnLeresL (rlba)