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Economics: Positive vs. Normative Analysis

Economics is the study of how society uses scarce resources to produce goods and services and distribute them. It can be positive or normative. Positive economics objectively describes economic situations, while normative economics involves value judgments about what should or ought to be. Microeconomics analyzes individual units like income and demand, while macroeconomics analyzes aggregates like national income and interest rates. The two differ in scope and contributors, with microeconomics focusing on small units and macroeconomics taking a broader view of the whole economy.

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20 views1 page

Economics: Positive vs. Normative Analysis

Economics is the study of how society uses scarce resources to produce goods and services and distribute them. It can be positive or normative. Positive economics objectively describes economic situations, while normative economics involves value judgments about what should or ought to be. Microeconomics analyzes individual units like income and demand, while macroeconomics analyzes aggregates like national income and interest rates. The two differ in scope and contributors, with microeconomics focusing on small units and macroeconomics taking a broader view of the whole economy.

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Chapter 1: Introduction to Economics

Definition of Economics

Economics is the study of how society uses scare resources to produce valuable goods and services
and distribute them among different individuals.

Lionel Robbins defined economics as. “The science which studies human behavior as a relationship
between ends and scarce means which have alternative uses”.

Positive Economics/Analysis

Positive economics is an objective study of an economy. This describes what is happening and what is
true. For example, an increase in government spending would lower the unemployment rate. There is
no value judgment in this statement. It simply says how government spending affect unemployment
rate.

Normative Economics/Analysis

Normative economics involves ethical precepts and norms of fairness. It mainly deals with what
should be or what ought to be as a value judgment. For example, “Government spending should be
increased” is a normative statement.

Microeconomics

Microeconomics is the branch of economics that is concerned with individual areas of economic
activity such as individual income, individual demand, individual supply, saving of a person etc.

Macroeconomics

Macroeconomics is the branch of economics that deals with the economic behavior as a whole. For
example: national income, Interest rate, Market demand, market supply etc.

Differences between Microeconomics and Macroeconomics

No. Comparison Microeconomics Macroeconomics


1. Originate Latin word Mikros means small Latin word Makros means large
2. Scope Small Large
3. Economy Cannot gives complete picture of an Gives complete picture an economy
economy
4. Prime Alfred Marshall J.M. Keynes
Contributor
5. Examples Individual price, individual demand, National price level, Aggregate
individual income, individual supply, demand, Aggregate supply, national
individual saving. saving, national income.

With best wishes,


Babor Ahmad
Lecture,
Department of Economics,
Dhaka International University (DIU), Bangladesh
MSS in Economics (HSTU), BSS (Hons) in Economics (HSTU)

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