If you’re interested in learning more about economics, you’ve probably heard the term “economy” at one point or another. The economy is the business environment, and economics provides context for decision-making. A good introduction to the subject can be found in the book The Complete Idiot’s Guide to Economics by Tom Gorman. If you’re unsure, consider the following guide to economics.
The study of economics centers around the concept of scarcity, and how it impacts human decisions. This is true for individual decisions as well as those of business and society. Scarcity arises when human wants to outstrip available resources.
Resources are needed to produce goods and services, but there is a limited amount of each. Time is the ultimate scarce resource. Each person has twenty-four hours to acquire the goods they want. Scarcity, therefore, has implications on many complex issues of importance to society.
It’s also important to understand the principles of the economy, especially when it comes to voting on laws and regulations. As an example, we saw how “fiscal cliff” brought the United States to a standstill, and the importance of understanding economics in today’s world.
What Is Positive Economics, and How Does It Work?
The word “positive economics” refers to economic analysis that is objective. Most economists base their projections for the future on what has happened and what is now happening in a specific economy. This investigation is a win-win situation. Normative economic research, on the other hand, uses value judgments to anticipate the future.
Positive Economics: An Overview
To build economic theories, the cornerstone of good economic practice is to look at fact-based behavioral finance or economic interactions, as well as the cause and effect interaction. Behavioral economics is founded on the psychological assumption that individuals would make rational financial decisions depending on the information available to them.
Because of its use of fact-based idea determination, many will refer to this topic as “what is” economics. The study of “what should have been” or “what ought to be” is referred to as normative economics.
The word “economics” derives from the ancient Greek word, which means “to manage a household.” French mercantilism used the term “political economy” to refer to the administration of public affairs. This wealth-centric definition limited the subject’s scope, but was widely seen as limiting as it ignored non-wealth aspects of human life.
Putting Positive Economic Theories to the Test
Data may be used to verify and reinforce conclusions derived from positive economics analysis. Positive economics, for example, would predict that more individuals will save money as interest rates rise since historical behavior supports that notion.
In contrast to normative claims and ideas, which are subjective, this analysis is objective. The majority of the news media’s reporting consists of a mix of positive and normative economic comments or assumptions.
Policymakers can use positive economic theory to assist them execute normative value judgements. It can, for example, illustrate how the government can influence inflation by printing more money, and it can back up that claim with data and analysis of inflation-money-supply behavioral correlations. However, it makes no mention of how to effectively legislate and implement specific inflation and money creation programmed.
When both positive and normative economics assignment help studied together, they give a thorough knowledge of public policy. These theories include both true and false facts and assertions, as well as an analysis based on personal opinion. It is best to grasp the positive economic foundation of behavioral finance and the causes of occurrences when making policy decisions, as well as normative value judgements on why things happen.
Benefits And Drawbacks Of Positive Economics
Positive economics comes with its own set of advantages and disadvantages. Here are some of the most important benefits and drawbacks of this economics stream.
Instead of opinions and value judgments, positive economics is based on objective data. We have information at our disposal to substantiate any of our statements. For example, we may utilize past data to figure out how interest rates and consumer behavior are related. Consumers cease borrowing when interest rates rise since they will have to pay more in interest.
There are no value judgements in positive economics since it is based simply on facts and statistics. This enables policymakers to devise the required steps to address any economic situations and steer the economy in the desired direction. To avoid a recession, the Federal Reserve, for example, might cut interest rates.
Individual feelings and views may have a significant influence on economic policies and practices. People, for example, frequently make financial decisions based on emotions rather than facts in their personal life. This can lead to people making poor decisions. However, if individuals pay attention to the facts, they may be able to make better personal economic judgments.
Certain economic situations are founded on emotions, and not everyone is concerned with the facts. When making decisions, people frequently opt to ignore data, like in the case above. Experts may advise people to save during difficult economic times, but some people may want to make a large buy instead. In essence, it’s difficult to exclude the emotional component from economics.
Just because you have a lot of data doesn’t imply you’ll be able to come up with a foolproof answer or conclusion. That’s because economics isn’t a precise science, whether it’s positive or normative. There are many additional factors that frequently come into play that might alter the outcome.
Positive economics, likewise, may not be a one-size-fits-all solution. For example, officials frequently utilize data to develop a policy or solution that has varying effects on various people. What works for one sector of the population does not have the same effect on others.
How Do Positive and Normative Economics Differ?
Positive economics, on the other hand, is based on factual facts, whereas normative economics is based on subjective data. The latter is based on value judgments based on human sentiments and views rather than analysis. In contrast to normative economics, which focuses on what economic conduct should be, positive economics focuses on what economic behavior should be.
What Is the Difference Between a Positive and a Normative Statement?
Positive and normative statements have significant differences. On the other hand, normative claims are subjective. They are typically based on personal ideas and value judgements and include the usage of opinions and value judgments.
Economics is both a science and an art. This is due to the fact that it blends reality with value judgements. However, there are economic streams that distinguish what is happening today from what should be happening in the future.
Normative economics, on the other hand, is concerned with facts-based opinions. Despite the fact that it may appear to be the greatest option, no society can effectively run on a good economic outlook. When it comes to developing new policies, integrating positive and normative economics may be the best way.
The author is a professional journalist and an award-winning writer; he is a regular contributor to LiveWebTutors. He is an experienced educational writer and provides all types of assignment help. Author has a team of professional writers with him providing accounting assignment help.
For more information visit us at: LiveWebTutors Contact us at: +61-2-8005-8227 Share your details with us at: email@example.com