Module 6.1 Positive and Normative Lecture

What is the focus of positive economics?

Positive economics focuses on objective statements about the world—what 'is.'

What characterizes normative economics?

Normative economics concerns what people ought to do—what 'should be,' based on personal preferences and opinions.

Provide an example of positive economics.

Analyzing how a tax on tacos affects their consumption.

What does efficiency in economics refer to?

Efficiency refers to the inability to improve one individual’s situation without worsening another’s.

How is equity defined in economics?

Equity relates to the fairness of how resources and outcomes are distributed across society.

Contrast the concepts of efficiency and equity.

Efficiency is quantifiable and focuses on maximizing outcomes, while equity is subjective and based on societal values regarding fairness.

What is a potential argument for resource redistribution?

Many believe that inequitable distributions call for some redistribution of resources, even if it leads to efficiency loss.

Why is the interaction of positive and normative analysis important?

Recognizing the difference between positive (facts) and normative (opinions) analysis is crucial for constructive debates.

What is the outcome of a tax on a good, according to positive economics?

Typically, a tax on a good results in reduced consumption.

What role do personal values play in normative economics?

Personal values guide the opinions and preferences expressed in debates about what ought to be done.