1.1.2 Positive and normative statements

Question 1

Normative statements

Answer 1

Normative statements express an opinion (don’t say opinion in exam) about what ought to be. They are subjective statements - i.e. they carry value judgments. For example, the level of duty on petrol is unfair and unfairly penalizes motorists. They involve a value judgement.

Question 2

Positive statement

Answer 2

Objective statements that can be tested or rejected by referring to the available evidence. Positive economics deals with objective explanation. For example: “A rise in consumer incomes will lead to a rise in the demand for new cars.” Or “A fall in the exchange rate will lead to an increase in exports overseas.” It involves a scientific method as the statement can be tested.

Question 3

Value judgement

Answer 3

A view of the rightness or wrongness of something, based on a personal view.

Question 4

What is the role of value judgements?

Answer 4

Economists tend to use positive statements to back up normative statements. Value judgements influence individuals’ choices in the economic decisions they make
They also influence government choices with regards to economic policies they choose to adopt and spend money on.