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POSITIVE AND NORMATIVE ECONOMICS
Economics as a social science adopts an analytical approach to the study of changes in economic variables on the actions of human beings. The scientific approach to the analysis of economic events, commonly referred to as positive economics, concerns itself with statements that are capable of verification by reference to the facts. For instance, "If the price of cloth is higher, people will buy less" or, "As the money in the economy increases, the price level will go up". We can statistically estimate the relationship between cloth prices and sales or between the money supply and general price level. In principle all positive statements should be reducible to some form which is testable by reference to empirical evidence. As a doctrine, the advocates of this part of economic science, would argue that economic science does not and should not encompass statements that involve value judgements, i.e. statements of the form 'x is good or bad'. According to them, such would be the province of normative economics and that economists cannot make any statements involving value judgements.Normative economics involves prescriptions or statements about "what ought to be", rather than "what is". It involves the advocacy of specific policy prescriptions, because it uses ethical judgements as well as knowledge of positive economics. Contrary to positive economic statements, normative economic statements cannot be tested before they are accepted or rejected. Normative economics gives rise to statements such as "corporate sector should not maximize profits", or "monopolies should be regulated". This type of economics may be contrasted with positive economics which is concerned with describing and analyzing the economic phenomenon as it is.
What are the Four different measures of GDP Using circular flow model we see that there are 4 equivalent techniques of measuring GDP: Using the definition: market value
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benefit of GDP
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Explain the multiplier effect with example Deposits and loans in banks give rise to an important multiplier effect. We use a simple example to illustrate this effect. Consider
If 5000 units are sold and income increases by 20% with an income elastiticy of +2, what will the number of sales units be after the increase
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illustrate the effects of a reeal wage existing in the labour market if it is perfectly competitive
DEFINE IS CURVES AND DRIEVE IT
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