«Home

what is normative and positive economics

What is normative and positive economics. Please explain with ecamples

Avatar
Newbie
1 answers

Positive economics is not only an analysis of the consequences of the specific activity of government of the country but also an analysis of the public sector and political and economic forces that are practically implemented into these programs. When economists go beyond the positive economic analysis, they move into the normative economics. It is associated with the assessment of how successfully various programs are implemented as well as the elaboration of a new strategy that best meets the defined objectives.

In normative economics are made some statements such as: "If the state seeks to limit oil import from the least cost to the state and consumers, in this case, rates are preferred rather than quotas," or "if the agricultural programs are aimed at maintenance of the poorest farmers, the price of support system is less attractive in comparison with the system properly designed transfer income. In other words,this economics compares the extent to which various government programs meet the desired goals and it turns out what programs reach them. In positive economics, on the other hand, there are statements such as: "the introduction of quotas on oil in 1250-ies led to an increase in domestic prices and a more rapid depletion of our natural resources." Such statements simply describe the results of the program without the assessment of how it would meet their targets. You do not decide whether the results are desirable or not. If economists make such statements, they seek not to impose their own criteria and their own assessment. They often consider themselves as those who technically assist in the achievement of those goals by policy makers. Positive economics studies and explains the observable economic facts, events, processes, establishes a link between them as opposed to normative economic theory, which instructs, advises how to conduct economic policy to manage the economy.

Normative economics is not only able to explain phenomena and events but is designed primarily to promote the development of economic policies, the necessary course of action, rational decision-making.

For example:

The government regulates the prices of food products, to ensure their availability it is normative economics.

The government does not regulate the price of food so as not to cause their deficit it is a positive economics.

0
Avatar
Newbie
Your answer
Add image

By posting your answer, you agree to the privacy policy and terms of service.