Chapter 2, Problem 1QR

To determine

Definition of positive economic statement and give an example.

Explanation of Solution

Positive economics is a perspective that concerns with the description and explanation of economic phenomena. It is concerned with “what is” analysis. The normative statement is the value judgment regarding a phenomenon. In simple words, it states what a phenomenon ought to be.

The statement “income tax system collects a lower percentage of income of the poor” explains the situation as it is, and it is a fact based statement. Therefore, this is an example of positive economic statement. The statement “reduction in the tax rates of rich makes the tax system fairer” explains that the reduction in tax rate of the richer leads to tax system failure. It is an opining based statement. Therefore, this is a normative statement.

Economics Concept Introduction

Positive economic statement: A statement that is based on objective and fact is termed as a positive economic statement.

Normative economic statement: A statement that is subjective and value based or opinion based is termed as a normative economic statement.