Question

Chapter 2 covers the concepts of positive and normative statements and their role in economics. Positive statements describe the world as it is, while normative statements describe how the world should be. Can you give one example of each type of statement, and explain why it can be classified as positive or normative?

Answer 1

Positive statements are objective and fact based, while normative statements are

subjective and value based. Positive statements can be proved or disproved.

Normative statements are opinion-based and cannot be proved or disproved.

The government should give free education to all to improve standard of living is a normative statement. It is an opinion.

The government should restrict imports to help our domestic producers.

Fines must be imposed on reckless drivers to improve safety.

Examples of positive statements are

Lowering the income tax rates will lead to higher disposable income.

Job training will improve job performance.

Thirty-five percent of the population live in poverty.