Chapter 2: postive and normative statements

Question 1

what are positive statements

Answer 1

concerned with what is

• substantiated by facts, research and empirical evidence
• can be tested
• descriptive (describes what is)

Question 2

what are normative statements

Answer 2

• concerned with value judgements
• reflect beliefs or opinions as to what SHOULD be
• cannot be tested
• prescriptive (offer suggestions for what SHOULD be)
• are subjective (because they reflect the personal views or beliefs of the person making them
• cannot be verified

Question 3

why do we need positive and normative statements

Answer 3

1. conduct objective analysis (of all pros and cons of alternative economic policies )
2. policy makers have to make subjective judgements
   (which policies to pursue and which to sacrifice) in order to optimally utilize society’s scarce resources

Question 4

why do economists disagree

Answer 4

1. arrive at different conclusions about the theory’s validity or magnitude of important variables in the theory
2. they may have different values and beliefs