Question

Define normative economics with a suitable example.

Hint:

Normative economics involves value judgments and addresses what ought to be done, based on ethical and moral considerations.

Answer 1

Step 1: Defining Normative Economics:
Normative economics is the branch of economics that deals with what ought to be rather than what is. It involves value judgments and opinions about economic fairness, the role of government, or the allocation of resources. Normative economics focuses on how things should be done, often involving ethical and moral considerations. It is concerned with ideals and objectives, such as how to reduce poverty or achieve income equality.
Step 2: Examples of Normative Economics:
An example of normative economics is the statement, “The government should raise the minimum wage to reduce poverty.” This is a normative statement because it reflects a value judgment about what the government should do. It is not based on observable facts but on opinions and ethical considerations.
Step 3: Key Features of Normative Economics:
- Value Judgments: Normative economics often involves opinions about what should be done to improve economic conditions.
- Ethical Considerations: It addresses issues like fairness, justice, and equity in economic policies.
- Focus on Objectives: It is concerned with achieving social goals like reducing inequality or improving welfare.
Step 4: Final Conclusion:
Normative economics is based on subjective views about economic policies and outcomes, often centered around fairness and the desirable goals of an economy. It contrasts with positive economics, which is based on objective analysis of economic facts.