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Positive and Normative Economics

Learn the difference between positive economics (what is) and normative economics (what ought to be) with examples, verification criteria, and value judgements.

Notes

Positive and Normative Economics

Class 11 Microeconomics — Facts vs Value Judgements

Positive Economics

Positive Economics
Positive economics studies the facts of life — it deals with 'things as they are'. It describes what was, what is, or what will be under given circumstances. These statements do not pass any value judgements.

Examples: "India is an overpopulated country." • "Prices are constantly rising."

Positive statements may be true or false — they can be verified with actual data. Positive Economics is neutral between ends; an economist analyses things as they are without moral judgement.

Normative Economics

Normative Economics
Normative economics tells us 'what ought to be'. It deals with desirable vs undesirable things and gives decisions regarding value judgements.

Examples: "India should not be overpopulated." • "Prices should not rise."

Positive vs Normative — Side by Side

Viewing: Positive Economics
Meaning

It deals with what is or how economic problems are actually solved.

Verification

Can be verified with actual data.

Purpose

To make real description of an economic activity.

Value Judgements

Does not give value judgements — neutral between ends.

Examples

1. Prices in Indian economy are constantly rising. 2. There are inequalities of income in our economy.

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Quick Reference — Question Words

Positive Economics (What is?)

  • ▶What is?
  • ▶What was?
  • ▶What will be?

Normative Economics (What ought to be?)

  • ▶What ought to be?
  • ▶What should happen?
  • ▶What should have happened?