Chapter 1, Problem 1.5LO

To determine

Relationship between the positive and normative economics

Concept Introduction:

Positive economics

It is the analysis that is strictly limited to making either purely descriptive statements or scientific predictions; for example, “If A, then B.” A statement of ‘what is’. In other words, it is dependent on the fact and objective based. For example, “If the price of gasoline goes up relative to all other prices, then the amount of it that people buy will fall.” That is a positive economic statement.

Normative Economics

It is the analysis involving value judgments about economic policies; relates to whether outcomes are good or bad. A statement of what ought to be. It is dependent on the person and is subjective and value based. Since each of us has a desire for different things we have different values. Then we express a value judgment, we are simply saying what we prefer, like, or desire because individual values are diverse. People express widely varying value judgments about how the world ought to be