Question

Compare positive economics and normative economics.

Answer 1

Positive economics deals with what it means, it analyses a problem on the basis of facts and examines its causes whereas, Normative economics responds to a question like what ought to be.

• Positive Economics:

1. An increase in the money supply implies a price rise in an economy.
2. As the irrigation facilities and application of chemical fertilizers expand, the production of food – grains increases.
3. An increase in birth rate and a decrease in the death rate reflect the rate of growth of the population.

• Normative Economics:

1. Inflation is better than deflation.
2. More production of luxury goods is not good for a less developed country.
3. Inequalities in the distribution of wealth and incomes should be reduced.