Question

Explain the concepts of positive and normative economics with illustrations.

Answer 1

Positive economics describes the matter of the presence of a theory with proven facts and figures that needs to be taken into account before developing the theory. For example, Law of demand where the theory is derived with proven facts.

Normative economic is based on beliefs that are supported by valued judgement which is better for the nation's economic future as well as leads to social welfare. For example, belief that income should be distributed evenly in the economy.