Consumption in Islamic Point of View - ASSUMPTION

During the previous lesson, our lecturer asked us to prepare our own assumption on consumption in Islamic point of view.

And seriously, it went really complicated (especially to me as the one who not really master in Microsoft Excel, how to make graph and bla bla bla). Indeed membebel sepanjang buat graph senget lah apa lah. Hampir give up -.-

But to see everyone successfully completed their homework, it happened to burn my inner spirit!

Yayy alhamdulillah kerja sekolah dah siap! Akhirnyaaaaaaaaaaaaaaaaaa

So yeahhh!! here is the result. (but i don't think this assumption is going to be accepted but at least i tried :)

***** 

ادخار	استهلاك	دخل
0	1000	0
0	1000	1000
200	1800	2000
400	2600	3000
600	3400	4000
800	4200	5000
1800	4200	6000
2800	4200	7000

*** Consumption’s general equation: C = a + MPC (Y) assuming MPC value varies as the income increases.

Assumptions:

- Horizontal line (where Y=0 until 1000). Based on this graph we assumed, the lowest amount of consumption that everyone should consume regardless they are rich or poor is 1000 even though the current income is zero or any point before 1000 (assuming the poor received the money from all the donations and zakat). And this is the necessary level to achieve to get survived in life. Meanwhile in saving part we assumed there is no dissaving as they make no loan or anything that will be resulted as their liabilities in order to cover it back. Hence, S=0 and the same goes to the point when income and consumption both equal to 1000, we also assumed S=0 as all income will be used on consumption (Y=C). And what comes to mind is, everyone should at 1000 and above because those who consume below it we claimed as stingy (bakhl or taqtir).

-Increasing in consumption due to increasing in income (starting from I = 2000 until 5000). As we all know, Islamic economy agreed with the conventional where stated as the income of individual increases, the consumption on goods and services will also increase. But in Islam for each point of income there is a limit that we cannot go further and consume beyond it where it called ‘waste limit’. For example, if we earned 2000 per month so for us to consume what is below it, let say 1800 and keep the balance 200 as saving. So this method will be applied at every point of income and that is why it will always be under the 45° line and thus, the space in between consumption line and 45° line we assumed a waste.

-Horizontal line (when Y=5000 and above). In this graph we assumed 4200 is the maximum level of consumption that an individual could spend throughout his life. So even though the income of a person increases by time he still has to spend at 4200 or any point below and if not, we claimed he is doing a waste (israf, tabzir or tarf), and it is forbidden in Islam. Thus, the extra income-which we cannot consume, will directly go to saving or real investment.

-So we can make some conclusions here: (1) Consumption in Islamic view will always increase as the income increases but stay within the area of two limits, maximum and minimum lines where we cannot go after these limits. (2) Saving will always increase based on this Islamic law.

*****

Thanks for reading :) but please don't totally believe in this urban fact hahahaha. Just an assumption bro :P