Discover how choices,money, and goodsshape our worlddaily!Discover how choices,money, and goodsshape our worlddaily!ECONOMICSTheoreticalknowledgeon economics elementaryfor beginnersFirst Edition 2026AAuutthhoorrss::Norhidayah &Nur Azreen
Published and printed by:Politeknik Kota BharuDepartment of CommerceKM 24 Kok Lanas16450, Ketereh,Kelantanhttps://pkb.mypolycc.edu.myAll rights reserved. No part of this publication may bereproduced, distributed, or transmitted in any form or by anymeans, including photocopying, recording, or other electronic ormechanical methods, without the prior written permission of thepublisher.Economics for beginner | Hidayah & Azreen2026 NORHIDAYAH BINTI MOHD SALLEH, NUR AZREEN AZRIANA BINTI AZHAMFirst Edition 2026ECONOMICS FOR BEGINNER
ECONOMICS FORBEGINNERPoliteknik Kota BharuNORHIDAYAH BINTI MOHD SALLEHNUR AZREEN AZRIANA BINTI AZHAM
NORHIDAYAH BINTIMOHD SALLEHNorhidayah Binti Mohd Salleh is a senior lecturer atthe Department of Commerce, Politeknik KotaBharu. She obtained a Bachelor of Accounting(Hons) from International Islamic University Malaysia. She can be contacted at [email protected] Azreen Azriana Binti Azham is a senior lecturerat the Department of Commerce, Politeknik KotaBharu. She obtained a Bachelor of Accountancy(Hons) from Universiti Utara Malaysia and a Master inAccounting from Universiti Teknologi MARA (UiTM).She can be contacted at [email protected] AZREENAZRIANA BINTIAZHAM
MarketStructureDemand & supplyanalysisProduction & CostTheoryMAP OF THE BOOKIntroduction toeconomicsIntroduction to IslamicEconomics & Islamic SystemMarket Equilibrium &Government Intervention0214264453economics for beginners65AWord from theAuthorsAuthor’sAppreciationiii
This e-Book introduces the basics of economics. It explainshow people and businesses make choices with limitedresources. Readers will learn about supply and demand,prices, production, and markets.This book also shows how these ideas help us understandreal-life problems and make better decisions in theeconomy.i economics for beginnersA WORDFROM THEAUTHORS
Author’sAppreciationGratitude is extended to Allah S.W.T for guidance and blessingsin the completion of this book. It is hoped that this resource willbenefit Commerce Department students in polytechnics acrossMalaysia.Appreciation is also given to all individuals who contributeddirectly or indirectly. Advice, encouragement, and supportthroughout the writing and publishing process were invaluable.Special thanks to those who shared ideas and dedicated timeand effort. This book would not have been possible withoutsuch contributions.Hida & AzreenBig Thanks,ii
TOPIC1Introduction toeconomicsECONOMIC FORBE G I N N ERS
02KNOWLEDGE MAP
economics
Economics ConceptsDefinitionFocus: Individual markets, firms, andhouseholds.Examples:1.Choosing coffee based on price andtaste.2.Adjusting smartphone productionbased on demand.3.Burger chains are competing forcustomers.Focus: Overall economy, national income,inflation, unemployment, and policies.Examples:1.Rising prices increase cost of living.2.Job losses affect economy andgovernment response.3.Country’s income and production growover time.Economics is how societies manage scarce resources to satisfy unlimited wants. Itstudies decisions by individuals, businesses, and governments about what to produce,how to produce, and for whom.Microeconomics MacroeconomicsTwo Main Branches of Economics03
04Limited resources (land, labor, capital) vs.human unlimited wants.Decisions must be made on how to useresources.The value of the next best alternative givenup when making a choice.Choice:Opportunity CostScarcity:Economic problems arise becauseresources are limited, but human wantsare unlimited. Key issues include:BASICECONOMICSPROBLEMSQU ESTION SBASICECONOMICSDecide which goods and services to makewith limited resources (e.g., food vs.machinery).Determine quantities based on demand,production capacity, and resources.Choose production methods (labor-intensivevs. capital-intensive) for efficiency and costeffectiveness.How much to produce?How to produce?What to produce?For whom to produce?Decide how goods and services aredistributed based on income, social class,and fairness.Every economy must answer these questions:
05Microeconomics and macroeconomics are two branches ofeconomics that study different levels of economic activity.
Trade-offsBecause resources are limited, choosing moreof one thing means less of another.ExampleProduction Possibility Curve(PPC)A graph showing all possible combinations oftwo goods that can be produced using allresources.ExampleOpportunity CostThe value of the next best alternative given upwhen choosing one option over another.ExamplePRODUCTIONPOSSIBILITYCURVE(PPC),OPPORTUNITYCOSTANDTRADE-OFFA car company decides between makingsedans or SUVs.Investing in new technology instead ofemployee training.A company focuses on product developmentinstead of marketing.06
07PPC shows all possible combinations of two goodsa company can make with its resources.Opportunity cost is what you give up whenchoosing one option over another.Example: Making more cars means fewercomputers.Trade-offs happen because resources are limited.Using resources for one product means less foranother.EXAMPLEPPC shows trade-offs between goods.Opportunitycost shows what is lost when makingachoice.How Does the PPC, Opportunity Cost, andTrade-offs Work Together?K E Y I D E A S
Capitalism (Free Market)Mixed EconomicSocialism (Central Planned)Islamic EconomicPrivate ownership and marketforces decide production with littlegovernment interference.Combines capitalism and socialism;government regulates markets andensures welfare.Government controls production,resource allocation, anddistribution.Based on Islamic principles:fairness, justice, ethical conduct,and balanced trade.Types of Economic SystemsAn economic system is how a society organizes the production, distribution, andconsumption of goods and services. The main types are Capitalism, Socialism, MixedEconomy, and Islamic Economic System. Each has its own characteristics, advantages,and disadvantages.E X A M P L EE X A M P L EUnited States, Canada.Former Soviet Union, North Korea.United Kingdom, Germany, France.Saudi Arabiaandother Islamic countries.E X A M P L EE X A M P L ED E F I N I T I O N08
K E Y09CHARACTERISTICS
Combines business success withsocial welfare.Government helps reduce povertyand supports public services.Encourages growth and fairness.Some rules make business harder.Islamic laws can be complex.Hard to apply in diverse systems.Excessive government control mayslow progress.High taxes and spending can beburdensome.Government decisions can causeconflicts.ADVANTAGES AND DISADVANTAGESCapitalism(FreeMarket)Big companies may controlmarkets.Focus on profit, not safety.Economic problems like job lossesaffect many people.ADVANTAGES DISADVANTAGESSocialism(CentralPlanned)MixedEconomicIslamicEconomicCompetition creates betterproducts.People have many choices andfreedom to earn money.Helps economy growReduces gap between rich andpoor.Access to healthcare, education,housing.Jobs are stable; poverty is lower.Promotes fairness and honesty.Reduces debt and poverty.Encourages teamwork and sharedrisk.Less competition slows progress.Too much government control canbe inefficient.Fewer choices for people.OF EACH ECONOMIC SYSTEM10
Definition:Economics is how societies manage scarce resources to satisfyunlimited wants.EconomicConceptsPPC,Opportunity Cost& Trade-OffsKey TakeawaysBranchesMicroeconomics: Studies individuals, firms, and markets.Macroeconomics: Studies the economy as a whole (GDP,inflation, unemployment).Basic Problems (due to scarcity)Scarcity: Limited resources vs unlimited wants.Choice: Selecting among alternatives.Opportunity Cost: Value of the next best alternative given up.Every Economy Must AnswerWhat to produce?How much to produce?How to produce?For whom to produce?PPC: Shows all possible combinations of two goods usingresources efficiently.Opportunity Cost: What you sacrifice when choosing one optionover another.Trade-offs: Choosing more of one good means less of another.? Key TakeawayScarcity drives choices → PPC shows trade-offs → Different systemssolve problems differently.EconomicSystemsCapitalism (Free Market)Private ownership.✅ Competition, choices, growth.❌ Inequality, profit over safety.Socialism (Central Planned)Government ownership.✅ Reduces poverty, access to services.❌ Less competition, inefficiency.Mixed EconomicCombines capitalism and socialism.✅ Combines growth & welfare.❌ High taxes, government conflicts.Islamic EconomicPrivate under Sharia.✅ Fairness, ethical conduct.❌ Hard to apply in diverse systems.11
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TOPIC2Introduction toIslamic Economics &Islamic SystemECONOMIC FORBE G I N N ERS
14KNOWLEDGE MAP
economics islamic
Core Elements of theIslamic WorldviewConnections Betweenthe IslamicWorldview andEconomicsExamples:A dairy company ensuring animalwelfare as amanah.A furniture factory using sustainabletimber as khalifah duty.ISLAMIC ECONOMICSDefinitionIslamic economics combines economic principles with Islamic teachings, emphasizing social justice, ethics, andwelfare for individuals and society.Its foundation comes from the Qur'an and Sunnah, aiming to create a just, ethical, and balanced economy.Islamic economics: Study of economic systems based onhalal resource management, justice, and welfare,following Shariah.1.Wealth is a trust (amanah) from Allah.2.Economic activity is a form of ibadah (worship) if halal.3.Prohibits exploitation, injustice, and monopolies.4.Encourages cooperation and risk-sharing.5.Aims for falah (success in dunya & akhirah).Examples:A farm producer selling halal poultry without cheatingon weights.A car manufacturer practicing profit-sharing inpartnerships.Impacts of IslamicEconomic Philosophyon the System15Tawhid (Monotheism):All aspects of life are interconnected and belong to God.Emphasizes unity and accountability under divine ownership.Khalifah (Vicegerency):Humans act as trustees of resources.Responsible for ethical management and sustainabilityAkhirah (Hereafter):Belief in life after death ensures accountability.Guides moral decision-making for eternal consequences.Divine Justice (Adalah):Promotes fairness and equity in all dealings.Ensures justice in economic transactions and socialrelations.Falah (Success or Excellence):Balance between worldly life and spiritual fulfillment.Achieving both material prosperity and moral excellence.1.Promotes zakat, waqf, and sadaqah to reduce poverty.2.Regulates consumption – avoid extravagance & waste.3.Guides production toward halal and beneficial goods.4.Ensures fair income distribution.5.Strengthens social justice and unity.Examples:A packaging factory designing eco-friendly halalcertified packaging.A cosmetic producer making halal, cruelty-free beautyproducts.
ʿAlamiyyah(Universality)Applies to all people, not justMuslims.Promotes global trade andcooperation.Encourages cultural inclusivity.Examples:Halal cosmetics for internationalmarkets.Halal logistics serving globalsupply chains.6Insaniyyah(Humanness)Focus on human welfare anddignity.Provides equal opportunity andfair wages.Supports safe working conditions.Examples:Garment manufacturer paying fairwages.Tech company ensuring safe workenvironment.2Wasaṭiyyah(Moderation)Balances profit with ethics.Avoids extravagance and waste.Discourages greed and monopoly.Examples:Retailer setting fair prices forfarmers.Clothing factory avoiding luxuryexploitation.4CHARACTERISTICSOFISLAMICECONOMICS16Waqiʿiyyah(Practicality)Adapts to real-world challenges.Encourages halal innovation.Balances material and spiritualneeds.Examples:Food producer making plantbased halal alternatives.Solar panel company innovatingfor sustainable energy.5Rabbaniyyah(Divine Origin)Based on Qur’an and Sunnah. Economic activities must be halal. Protects society from injustice. Examples:Halal meat producer followingIslamic slaughtering rules. Beverage factory avoiding alcoholproduction.1Akhlaqiyyah(Ethicality)Promotes honesty and truth intrade.Avoids fraud and corruption.Builds consumer trust.Examples:Pharmaceutical company nothiding side effects.Food producer using honest halalcertification.3
SCOPE OFISLAMIC ECONOMICS17ISLAMIC ECONOMICS ANDFIQH (ISLAM JURISPRUDENCE)OBJECTIVES OF ISLAMICECONOMICS AS ADISCIPLINEBased on Islamic law (Shariah).Ensures halal transactions andcontracts.Prevents injustice and clarifieshalal/haram boundaries.Achieve falah (success in dunya andakhirah).Ensure justice in wealth distribution.Eliminate riba and exploitation.Promote welfare through zakat andwaqf.Support sustainable development.Examples:A microfinance producer cooperativesupported by zakat.A halal dairy factory ensuringaffordable milk.ISLAMIC ECONOMICS AS A SOCIALSCIENCEStudies human behavior with ethics.Focuses on social justice and equality.Uses zakat to reduce inequality.Islamic economics addresses three keycomponents:ProductionGoods and services must be halal andbeneficial.DistributionPromotes fair and just allocation of wealth.ConsumptionEncourages responsible use, avoid waste, fulfillhalal needs.THREE CONCEPTUALCOMPONENTS OFECONOMICSISLAMIC ECONOMICS AS APOLITICAL SCIENCEGuides policy on wealth distribution.Supports Shariah-compliant governance.Encourages justice-based taxation.ISLAMIC ECONOMICS AS AMULTIDISCIPLINARY SCIENCECombines economics with Shariah,sociology, and politics.Links ethics with business.Promotes innovation and sustainability.
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THE ROLES OF HALAL IN ISLAMICECONOMICSEthical FrameworkProvides justice and fairness in economic activities.Promotes social responsibility.Prohibits exploitation and unethical practices.010203Consumer Trust and ConfidenceBuilds trust in halal-certified products.Ensures compliance with Islamic principles.Strengthens consumer confidence in choices.Market OpportunitiesExpands global halal trade potential.Creates demand for halal goods and services.Opens profitable segments in multiple sectors.Halal EntrepreneurshipEncourages Shariah-based businesses.Motivates innovation with integrity.Supports fairness and accountability.Islamic Finance and Halal TransactionsProhibits riba (interest) and uncertainty.Promotes ethical financial systems.Ensures Shariah-compliant contracts.Social and Economic ImpactImproves social welfare and justice.Promotes equitable resource distribution.Supports inclusive economic growth.19
PRINCIPLES OF THE ISLAMICECONOMIC SYSTEMPromotes fairness and equity in transactions.Prevents exploitation and unjust treatment.Ensures social and economic justice.Wealth is a trust from Allah.Distribution must support welfare of all.Encourages zakat and waqf.Interest-based loans are forbidden.Encourages profit-sharing models(mudarabah, musharakah).Promotes ethical financial practices.Justice (Adl)Concept of Wealth and PovertyProhibition of Riba (Usury)Oneness of Allah guides all human activities.Ensures interconnectedness with divineguidance.Foundation for ethical behavior.Tawhid (Unity of God)Regulates economy to ensure compliance withIslamic principles.Supports common good and social welfare.Minimizes inequality.The Role of the State20
GOALS OF THE ISLAMIC ECONOMICSYSTEMFAIR WEALTH DISTRIBUTIONECONOMIC STABILITYPromote sustainablegrowth.Avoid resource exploitation.Prevent systemic risks.Distribute wealth equitably.Ensure access to basic needs.Provide equal chances for all.Encourage fair andproductive economicactivities.Promote well-being ofsociety.Prevent exploitation.SOCIAL JUSTICEREDUCE INEQUALITYAddress poverty and wealthgaps.Use zakat and welfaresystems.Support equal opportunities.21
22ISLAMIC SOCIAL ECONOMICSPurpose of ResourcesResources are a trust (Amanah) from Allah.Humans are stewards (Khalifah) responsible for sustainable use.Must ensure fairness and justice.The Concept of Production in Islamic EconomicsIn Islamic social finance, the concept of justice plays a central role. This involves:Redistributionof WealthFairness inFinancialTransactionsEconomicEmpowermentUses zakat, waqf, andsadaqah to help the needy.Supports public services andsocial welfare.Example: Zakat funds usedfor education and healthcare..Ensures transparency andhonesty in dealings.Prohibits exploitation andunfair practices.Example: Islamic banksoffering profit-sharing insteadof interest.Provides opportunities forthe less fortunate.Encourages inclusive growthand entrepreneurship.Example: Microfinanceprograms for smallbusinesses.Adapt the Concept of Justice in Islamic Social FinanceResources Entrusted as AmanahLand, labor, capital, and knowledge belong to Allah.Use resources wisely without harm.Contribute to societal welfare.Producers as Khalifah of Allah SWTBusinesses act as trustees of Allah’s resources.Create goods and services that benefit society.Follow Islamic principles.Ultimate Objective of ProductionNot just profit, but social benefit.Meet halal needs and promote well-being.Align with ethical and spiritual principles.
Definition:Islamic economics manages resources ethically, ensuring justice andwelfare under Shariah.KeyConceptsCharacteristicsof IslamicEconomicsKey TakeawaysCore Elements of the Islamic Worldview:Tawhid (oneness of Allah), Khalifah (vicegerency), Akhirah (hereafter),Adalah (Justice), and Falah (success).Economic Impacts:Promotes halal production, fair wealth distribution, and prohibits riba(interest).Rabbaniyyah (Divine origin)Insaniyyah (Humanness)Akhlaqiyyah (Ethicality)Wasaṭiyyah (Moderation)Waqiʿiyyah (Practicality)Alamiyyah (Universality)Scope ofIslamicEconomics23Covers production, distribution, and consumption.Functions as a social, political, and multidisciplinary science.Guided by fiqh (Islamic jurisprudence) and aims for social justice, welfare,ethical conduct, and sustainability.PrinciplesbetweenHalal andHaramPrinciplesof IslamicEconomicSystemTawhid, justice, and amanah.Prohibits riba and exploitation.Encourages profit-sharing.Promotes zakat and waqf.Balances individual and society.Clear distinction by Qur’an & Sunnah.Halal is default unless proven haram.Avoid doubtful matters (syubhah).Haram brings harm to self/society.Halal promotes benefit (maslahah).Roles ofHalal inIslamicEconomics·Ethical framework – Protects morality.·Consumer trust – Increases confidence in halal-certified products.·Market opportunities – Expands global halal trade.·Halal entrepreneurship – Encourages Shariah-based businesses.·Islamic finance – Supports halal contracts.·Social & economic impact – Improves welfare and unity.
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TOPIC3Demand &supply analysisECONOMIC FORBE G I N N ERS
26KNOWLEDGE MAP
Demand & Supply Analyis
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28The foundation ofdemand and supplyDemand and supply are the foundation of economic theory.Demand is how much consumers are willing to buy, and supply is how much producers arewilling to sell. The interaction between them determines the price and quantity of goods in amarket. Understanding these concepts explains the behavior of consumers and producers.What Is Demand and Supply Analysis?It’s the core of economics. It explains how prices are determined and whypeople buy or sell goods and services in a market.Prices and quantity sold depend on demand and supply.When demand is higher than supply, prices rise (things getexpensive).When supply is higher than demand, prices fall (discounts andpromotions happen).WHY IT MATTERS
DEFINITION29There is an inverserelationship between priceand quantity demand.When price increases,quantity demanddecreases.When price decreases,quantity demandincreases.DEMANDDemand refers to the quantity of a good or service thatconsumers are willing and able to purchase at different prices, ina given period, ceteris paribus (all else being equal).DEMAND CURVE &FUNCTIONDemand Curve:The demand curve is a graphical representation of the demandfunction, typically sloping downward from left to right, indicatingthe inverse relationship between price and quantity demand.Demand Function:This is an equation that shows the relationship between the priceof a good and the quantity demand.Law of Demand
30Determinants of demandPrice of Good ?:High Price → Demand DecreaseIncome ?:Normal goods: High Income → Demand IncreaseInferior goods: High Income → Demand DecreaseTastes and Preferences ?:Favorable Tastes and Preferences → Demand IncreasePrices of Related Goods ?:Substitute goods: High Substitute Price → Demand IncreaseComplements goods: High Complement Price → DemandDecreaseExpectations?:Expected Price Increase → Current Demand IncreasePopulation(Number of Consumers) ????:Population Increase → Demand IncreaseChange in Quantity Demand:Happens when the price changes. It’s a movement along thedemand curve.Changes in Quantity Demand vs. DemandChange in Demand:Happens when other factors change (like income or taste).It causes the whole demand curve to shift:Increase in demand → curve shifts rightDecrease in demand → curve shifts left
DEFINITION31SUPPLY CURVE &FUNCTIONSupply Curve:The supply curve generally slopes upward from left to right,indicating the direct relationship between price and quantitysupply.Supply Function:This is an equation that shows the relationship between the priceof a good and quantity supply.SUPPLY2 7Supply refers to the quantity of a good or service that producersare willing and able to offer for sale at different prices, in a givenperiod, ceteris paribus (all else being equal).There is an positiverelationship between priceand quantity supply.When price increases,quantity supplyincreases.When price decreases,quantity supplydecreases..Law of Supply
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33Change in Supply:Happens when other factors change (like input costs or technology) — shifts theentire curve:Increase in supply → curve shifts rightDecrease in supply → curve shifts leftDeterminants of supply2 7Price of Good ?:High Price → Supply IncreaseInput Prices (Cost of Production) ?:High Input Price → Supply DecreaseTechnology?:Advanced Technology → Supply IncreaseOutdated Technology → Supply DecreaseExpectations ?:Expected Higher Future Price → Current Supply DecreaseNumber of Sellers ?:More Sellers → Supply IncreaseGovernment Policies ?:Tax: High Tax → Supply DecreaseSubsidy: High Subsidy → Supply IncreaseChange in Quantity Supply:Happens when the price changes. It’s a movement along the supply curve.Changes in Qunatity Supply vs. Supply
PRICE ELASTICITYOF DEMAND ?340102Price Elasticity of DemandDeterminants of Price Elasticity of Demand ?Measures the responsiveness of the quantity demanded for a good toa change in its own price.Formula1.Availability of Substitutes: More substitutes → Demand is more elastic2.Necessity vs. Luxury Goods: Necessity goods → Demand is more Inelastic,while Luxury goods → Demand is more Elastic3.Time Period: Longer Time → Demand is more Elastic4.Proportion of Income: Large portion of income → Demand is more Elastic5.Addictiveness or Habit: High addiction/habit → Demand is more Inelastic6.Branding: Strong branding → Demand is more InelasticDegree Classifications Based on Price Elasticity
35Cross Elasticity of DemandGoods Classifications Based on Cross Elasticity
36Income Elasticity of DemandGoods Classifications Based on Income Elasticity
37PRICE ELASTICITY OF SUPPLY?Price Elasticity of SupplyDeterminants of Price Elasticity of SupplyMeasures the responsiveness of the quantity supplied for a good to achange in its own price.1.Time Period: More time → Supply is more Elastic2.Availability of Spare Capacity: More spare machines/workers → Supply is more Elastic3.Ease of Substitution in Production: Easier to switch goods → Supply is more Elastic4.Storage and Inventory: Easier to store → Supply is more Elastic5.Production Technology: Better technology → Supply is more Elastic6.Nature of Inputs:Degree Classifications Based on Price ElasticityIf inputs are common and easily available (e.g., basic labor, standard materials) →Supply is more elastic because producers can increase output easily.If inputs are scarce or highly specialized (e.g., rare metals, expert skills) →Supply is more inelastic because it’s harder to increase production.
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