Which is a normative economic statement

Normative Economics. Importance of Positive and Normative Economics. Positive vs. Normative Economics: An Overview Positive economics and normative economics are two standard branches of modern economics.

Key Takeaways Positive economics describes and explains various economic phenomena or the "what is" scenario. Normative economics focuses on the value of economic fairness, or what the economy "should be" or "ought to be.

Most public policy is based on a combination of both positive and normative economics. Compare Accounts. The offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear.

Investopedia does not include all offers available in the marketplace. Related Articles. Economics Is Economics a Science? Economics Production in Command Economies. Economics IMF vs. WTO vs. National Debt Explained: History and Costs. Partner Links. Related Terms Positive Economics Positive economics is the study of economics based on objective analysis of what is occurring and what has been occurring in an economy.

Normative Economics Normative economics is a perspective of "what ought to be" rather than what actually is, dealing heavily in value judgments and theoretical scenarios. Welfare Economics Welfare economics focuses on finding the optimal allocation of economic resources, goods, and income to best improve the overall good of society. This slowdown has been called the Great Recession. This is called normative reasoning, and the conclusions are called normative statements.

A policy recommendation could be that since unemployed workers are not earning income, government should try to stimulate demand in the economy, so unemployed workers could get back to work. Which of these recommendations is the right one? That depends on your subjective values. Positive statements and positive reasoning more generally are objective.

As such, they can be tested. These fall into two categories. A statement of fact or a hypothesis is a positive statement. Positive and normative are two branches of modern economics. While positive economics deals with the various economic phenomena, normative economics focuses on what economics should be and the value of its fairness.

However, before moving forward to the difference between positive and normative economics, you must know about them in detail. Positive economics is the stream of economics that has an objective approach, relied on facts. It concentrates on the description, quantification, and clarification on economic developments, prospects and allied matters. This subdivision of economics relies on objective data analysis and relevant facts and figures.

Therefore, it tries to establish a cause and effect relationship or behavioural relationship that can help determine as well as test the advancement of economic theories.

Here, the study of economics is more objective and focuses more on facts. Moreover, the statements are precise, descriptive and measurable. Such reports can be quantified with respect to noticeable evidence and historical references. Normative economics deals with prospective or theoretical situations. This division of economics has a more subjective approach. It focuses on the ideological, perspective-based, opinion-oriented statements towards economic activities.

Microeconomics deals with the analysis of the behavior of small individual firms, whereas macroeconomics deals with large global firms.

The majority of disagreements in our society on economic matters stem from normative issues. Partial equilibrium analysis uses the ceteris paribus assumption. This is a Latin phrase which means "other things being equal.

However, if the changes in the other things are small, the ceteris paribus is a reasonable approximation. When we are interested in the effect of a variable on one industry only, holding other things constant. An example is a labor strike which occurs only in one industry with a negligible impact on other industries.

The second case is when we are concerned with approximation of the effects , i. The event may have impacts on other industries, but these impacts may be outside the scope of the analysis or interests.

For instance, we may want to analyze the impact of an automobile import quota. The primary effect is felt in the automobile industry. The auto industry may ask an economist to study the impact on quota on automobile prices.

Obviously, such an import quota will have an impact on the steel industry, the aluminum industry, the glass manufacturing industry, the upholstery industry, etc. These effects are secondary or tertiary. Partial equilibrium analysis was popularized by the English economist, Alfred Marshall.

This approach permits graphical analyses. General Equilibrium analysis is concerned with the effects of a change in policy variable or exogenous conditions after all sectors have made adjustment to the new situation. For instance, the import quota on automobiles will have impacts on gasoline, steel, aluminum, glass, platinum, and other industries, and these in turn will have further impacts on the auto industry. Positive statements. Normative statements contain a value judgment.

Positive issues cannot be determined by majority voting. For example, "Since the price of oil is likely to rise in the future, we should develop more nuclear energy.