This is an introductory blog note for new students of AS microeconomics. It focuses on positive and normative economics.
Positive Statements
A positive statement is a statement about what is and contains no indication of approval or disapproval. A positive statement can be wrong; it can be tested by objective use of evidence. The tools of positive economics are reason, logic and empiricism.
Normative Statements
A normative statement expresses a value judgment about whether a situation is desirable or undesirable.
"The British economy would be a lot stronger if Mr Hunt was Governor of the Bank of England"
is a normative statement because it expresses a judgment about what ought to be. Statements that include indicator words such as: should, ought, or prefer are likely to be normative rather than positive Decide whether the following statements are positive or normative:
Statement
Positive or Normative?
1 The government can reduce obesity by offering a subsidy to low income families when they buy fresh vegetables in the supermarket
2 Luxuries should be taxed more heavily than necessities
3 A rise in the value of the exchange rate will reduce the number of overseas tourists visiting London
4 The Minimum Wage needs to be replaced with a Living Wage of £8 per hour
5 Taxpayers should not have to pay for bail outs to a failing Greek economy
6 Drought in the United States should lead to a rise in the world price of grain
7 Reducing the top rate of income tax to 45% will increase relative poverty in Britain
8 It is right that the European Union has introduced a system of carbon trading as a way of cutting CO2 emissions
9 A reduction in the standard rate of VAT ought to bring about a recovery in consumer spending on many goods and services
10 A rise in the price of petrol will lead to an increase in the demand for rail transport
11 An increase in the rate of inflation will lead inevitably to an increase in unemployment
12 Unemployment is more harmful than inflation
13 The Government might target unemployment rather than inflation in order to achieve an improvement in economic growth
14 As a general rule, people are happier in more equal societies
15 Despite a large increase in income per head, people are no happier today than they were 50 years ago
16 The promotion of happiness is a more important goal than the maximisation of production
