Assignment 1: Difference Between Positive and Normative Statements
ECON2318Assignment 1
Lesson 1, 2 & 3
1. Answer the following short questions. Each question is of equal value. (36 Marks)
a) What is the difference between positive and normative statements in economics? Provide an example of each.
Normative statements are subjective, often without a basis in fact or without evidence, the statements involve judgments about what should or ought to happen. Positive economics involves statements about economic reality, which can be supported or rejected based on facts. Positive statements don’t have to be true, but arguable.
A minimum wage hike will increase the demand in lower skill trade would be a positive statement example.
A minimum wage hike is undesirable as it doesn’t help the poor and causes higher inflation would be a normative statement.
b) Scarce resources within an economy can be categorized into 4 groups. State and explain them.
The scarce resources can be grouped into the following 4 categories {Labour, Land, Capital, and Entrepreneurship.}
Labour: Labour is the physical and mental achievements by humans in good and service production.
Land: Land includes natural resources used in the production of goods and services.
Capital/ Human Capital: Equipment and structures along with skills and knowledge people receive from education and job training. Entrepreneurship: Entrepreneurship is the action/process of combining labour, land, and capital together to produce goods and services.
c) What is economics and why is it useful?
Economics is the study of how people choose to use resources and make decision. Economics is useful because it helps us understand how we make choices in scarcity. Economics also helps understand and how to make choices for planning future activities. It can also help us predict how people will respond to changes
d) Define opportunity cost and provide 3 examples.
Opportunity cost is simply the next best alternative
Lesson 1, 2 & 3
1. Answer the following short questions. Each question is of equal value. (36 Marks)
a) What is the difference between positive and normative statements in economics? Provide an example of each.
Normative statements are subjective, often without a basis in fact or without evidence, the statements involve judgments about what should or ought to happen. Positive economics involves statements about economic reality, which can be supported or rejected based on facts. Positive statements don’t have to be true, but arguable.
A minimum wage hike will increase the demand in lower skill trade would be a positive statement example.
A minimum wage hike is undesirable as it doesn’t help the poor and causes higher inflation would be a normative statement.
b) Scarce resources within an economy can be categorized into 4 groups. State and explain them.
The scarce resources can be grouped into the following 4 categories {Labour, Land, Capital, and Entrepreneurship.}
Labour: Labour is the physical and mental achievements by humans in good and service production.
Land: Land includes natural resources used in the production of goods and services.
Capital/ Human Capital: Equipment and structures along with skills and knowledge people receive from education and job training. Entrepreneurship: Entrepreneurship is the action/process of combining labour, land, and capital together to produce goods and services.
c) What is economics and why is it useful?
Economics is the study of how people choose to use resources and make decision. Economics is useful because it helps us understand how we make choices in scarcity. Economics also helps understand and how to make choices for planning future activities. It can also help us predict how people will respond to changes
d) Define opportunity cost and provide 3 examples.
Opportunity cost is simply the next best alternative