Positive economics is focused on analyzing cause and effect relationships to describe and explain economic phenomena, such as predicting that if the price of fish increases, demand will decrease. Normative economics examines the economy from an ethical perspective on what it should or ought to be, making value judgments about whether economic events are good or bad. An example of a normative statement is that those earning higher incomes should pay more in taxes than those with lower incomes. Normative economics involves subjective assessments rather than objective analysis.
2. “Positive economics is related to the analysis
which is limited to cause and effect
relationship.
Positive economics describes and explains
various economic phenomena or the "what is"
scenario
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Positive Economics
3. If the price of fish were
higher, people will buy
less
Examples of Positive Economics
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4. Normative economics
Normative economics focuses on the value of
economic fairness, or what the economy "should be"
or "ought to be.“
Normative economics aims at examining real
economic events from the moral and ethical point of
view. It is used to judge whether the economic events
are GOOD or BAD.
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5. Example of Normative Economics
⬥ people who earn large income ought to pay
more income tax than people who earn low
income’ is a normative statement.
⬥ Normative statements reflect people’s
subjective value judgments of what is good or
bad.
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