Introduction To Positive Economics And Normative Economics

ECONOMICS
Institutional Affiliation
Economics
Economics is defined as the allocations of the scares resources among the competing uses. The importance of economic to a society is that the ability to effectively allocate resources such as labor, entrepreneurship, capital and human resource in producing goods. The economics then in making decisions has to asked certain question ensure maximum utilization of resources and there are two approaches; positive economics and normative economics, positive economics tries to ask the question ‘what if’ and without involving any judgmental question. Positive question seeks to review certain action that would utilize the available resources such as what is needed to satisfy the growing demand of consumer. The question reviews the introduction of a new aspect in production of goods and services, such as how the increase of fuel price will affect consumer. Economics then looks at the market survey to determine the opinion of the consumer if certain product price increased and the possibility of them buying it. Normative question involves determining “what ought to be done?” hence it involves the aspect of judgment. An example could be asking the question such asking the effort the government should take to create employment to the youths. Normative question occurs after certain survey done and the question seems to offer a solution to such problem. The goal of any government is to better the lives of its citizens and normative economics tends to ask the question what ought to be done to increase employment in a country.
Positive economics and normative economics use assumptions to eliminate any irrelevant information. The assumption helps economics in determining certain facts in the ground. Economics analyses two assumption; self interest and informed decision. Economics assumes that people normally act in their own self interest and not the interest of other people in making decisions, while the informed decision affects the consumer and the producer and hence they make decisions based on the information received. Economics may look at the informed decision of the producer to increase the fuel prices and such decisions tend to vary. The increases of fuel price might be due to the prevailing scarcity of the commodity.
Possibility curves involve decision on what a person needs to produce by looking at the available resources and technology. Possibility curves provide useful information on how the certain goods and services can be achieved by combining the available resource and use them efficiently. In establishing a bakery industry an entrepreneur seeks to look at the availability of millers industries to supply millers for baking. When the possibility is that millers industries are fewer in the area to establish bakery industries then such entrepreneur will incur an extra cost for transportation. If the possibility of transportation of such raw material is so expensive to the outcome of the production hence the option is for the entrepreneur to locate bakery industry to where raw material is readily available so as to utilize so proximity in creating a product.
Spillover principle provides that some goods, coast or benefit associated with such goods are not...