Question

Using your knowledge of positive and normative statements from earlier chapters, identify each of the following statements relating to price ceilings and price floors as either positive statements or normative statements. Assume that all the price controls are binding.

Part 1 A price floor in the form of a minimum wage is necessary to provide a living wage to people in the country. This statement is a statement. Positive or Normative

Part 2 A minimum wage increases the quantity supplied of labor in the workplace. This statement is a statement. Positive or Normative

Part 3 Governments should require higher minimum wages to increase economic growth. This statement is a statement. Positive or Normative

Part 4 A minimum wage won't encourage black markets to form. This statement is a statement.Positive or Normative

Answer 1

Normative statements are based on opinions and subjective in nature and cannot be proven or disproven whereas Positive statements are based on empirical evidence and so they can be tested.

Part 1 A price floor in the form of a minimum wage is necessary to provide a living wage to people in the country. This statement is Normative

Part 2 A minimum wage increases the quantity supplied of labor in the workplace. This statement is Positive

Part 3 Governments should require higher minimum wages to increase economic growth. This statement is Normative

Part 4 A minimum wage won't encourage black markets to form. This statement is Positive