Definition
Business economics has been viewed differently by
different scholars. Some of the popular definitions of business economics are
the following:— In the words of D.C. Hague, “Business economics is a fundamental academic subject which seeks to understand and to analyses the problems of business decision-making.”
— According Joel Dean, “The purpose of business economics is to show how economic analysis can be used in formulating business policies.”
— Brigham and Pappas believe that. “Business economics is the application of economic theory and methodology to business administrative practice.”
— Mc Nair and Merlam say that “Business (Managerial) economics ¡s the use of economic modes of thought to analyses business situation.”
— In the words of Spencer and Slegelman, “Business (Managerial) economics is the integration of economics theory with business practice for the purpose of facilitating decision-making and forward planning by management.”
Positive Economics
Positive economics is a branch of economics that focuses on the description and explanation of phenomena, as well as their casual relationships. It focuses primarily on facts and cause-and-effect behavioral relationships, including developing and testing economic theories. As a science, positive economics focuses on analyzing economic behavior. It avoids economic value judgments. For example, positive economic theory would describe how money supply growth impacts inflation, but it does not provide any guidance on what policy should be followed. "The unemployment rate in France is higher than that in the United States" is a positive economic statement. It gives an overview of an economic situation without providing any guidance for necessary actions to address the issue.
Normative Economics
Normative economics is a branch of economics that expresses value or normative judgments about economic fairness. It focuses on what the outcome of the economy or goals of public policy should be. Many normative judgments are conditional. They are given up if facts or knowledge of facts change. In this instance, a change in values is seen as being purely scientific. Welfare economist Amartya Sen explained that basic (normative) judgments rely on knowledge of facts.
An example of a
normative economic statement is "The price of milk should be $6 a gallon
to give dairy farmers a higher living standard and to save the family farm."
It is a normative statement because it reflects value judgments. It states
facts, but also explains what should be done. Normative economics has subfields
that provide further scientific study including social choice theory,
cooperative game theory, and mechanism design
Relationship Between Positive and
Normative Economics
Positive economics does impact normative economics because it ranks economic
policies or outcomes based on acceptability (normative economics). Positive
economics is defined as the "what is" of economics, while normative
economics focuses on the "what ought to be. " Positive economics is
utilized as a practical tool for achieving normative objectives. In other
words, positive economics clearly states an economic issue and normative
economics provides the value-based solution for the issue.
Positive
economics Vs. Normative Economics
Key Points
- Positive economics is a branch of economics that focuses on the description and explanation of phenomena, as well as their casual relationships.
- Positive economics clearly states an economic issue and normative economics provides the value-based solution for the issue.
- Normative economics is a branch of economics that expresses value or normative judgments about economic fairness. It focuses on what the outcome of the economy or goals of public policy should be.
- Positive economics does impact normative economics because it ranks economic polices or outcomes based on acceptability (normative economics).
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