Which of the following best describes a difference between positive analysis and normative analysis in economics?

• A. Positive analysis is concerned with ethical considerations, while normative analysis ignores ethics.
• B. Positive analysis focuses on objective facts and cause-effect relationships, while normative analysis involves value judgments about what ought to be.
• C. Normative analysis uses statistical methods, while positive analysis relies on opinions.
• D. Positive analysis is only used in macroeconomics, while normative analysis is used in microeconomics.

Answer: (B)

Verified step by step guidance

1. Step 1: Understand the definitions of positive and normative analysis in economics. Positive analysis deals with objective statements that can be tested or validated, focusing on facts and cause-effect relationships.
2. Step 2: Recognize that normative analysis involves subjective statements that include value judgments about what ought to be, reflecting opinions or ethical considerations.
3. Step 3: Compare the options given by identifying which one correctly contrasts the objective nature of positive analysis with the value-laden nature of normative analysis.
4. Step 4: Eliminate options that incorrectly describe the use of ethics, statistical methods, or the scope of macroeconomics versus microeconomics, as these do not accurately capture the fundamental difference.
5. Step 5: Conclude that the best description is the one stating that positive analysis focuses on objective facts and cause-effect relationships, while normative analysis involves value judgments about what ought to be.