From a neoclassical view, which statement best distinguishes positive analysis from normative analysis in economics?

• A. Positive analysis describes what is, while normative analysis prescribes what ought to be.
• B. Positive analysis is based on value judgments, while normative analysis is strictly factual.
• C. Both positive and normative analysis are solely concerned with policy recommendations.
• D. Normative analysis focuses on empirical data, while positive analysis is concerned with ethical considerations.

Answer: (A)

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 verified, describing 'what is'. Normative analysis involves subjective statements based on value judgments, prescribing 'what ought to be'.
2. Step 2: Identify that positive analysis is factual and descriptive, focusing on cause-and-effect relationships without involving opinions or ethical considerations.
3. Step 3: Recognize that normative analysis incorporates ethical perspectives and value judgments, often guiding policy recommendations based on what is considered desirable or ideal.
4. Step 4: Evaluate each statement in the problem by checking if it correctly reflects these distinctions: positive analysis as factual and descriptive, normative analysis as value-laden and prescriptive.
5. Step 5: Conclude that the statement 'Positive analysis describes what is, while normative analysis prescribes what ought to be' best captures the neoclassical distinction between the two types of analysis.