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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.
Jen spends all her income on shortbread cookies (S) and cupcakes (C). Her utility function is given by: U(S,C) = S +2C. Suppose that Jen has an income of $10 and that a cupcake cos
Examine two (2) tenets of the mercantilist school. Determine whether you agree or disagree with these principles. Provide at least two (2) reasons to support your answer
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Does a firm's price equal marginal cost in the short run, in the long run, or both? Explain.
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. (40 points) Consider two consumers, A and B. A and B both want perfect consumption smoothing (c = cf) and both have no current wealth. However, the two consumers have different i
From the lower left graph of Fig. it can be seen that there is a time lag associated with an oil price shock and its subsequent effect on unemployment. The results show that for th
Each Home Depot store must decide how much paint to order each month. From historical records, they know that the amount of paint they sell during May is distributed as follows: th
difference between gdp at market price and nnp at factor cost
What are the potential advantages of economic growth? The potential advantages of growth include • More goods and services are accessible to satisfy more want and requireme
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