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Positive and normative statements

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Intros
Lessons
  1. Positive & Normative Statements Overview:
  2. Positive Statements
    • Can be tested, changed or rejected
    • Example
  3. Normative Statements
    • Subjective, and cannot be tested
    • Example
  4. Unscrambling Cause and Effect
    • Ceteris Paribus
    • Example of this in positive statements
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Examples
Lessons
  1. Understanding Positive Statements & Normative Statements
    Is the following a positive statement or normative statement?
    1. "Poverty is the most serious economic problem."
  2. Is the following a positive statement or normative statement?
    1. "The government should ban smoking."
  3. Is the following a positive statement or normative statement?
    1. "Increasing income tax will discourage the unemployed to find work."
  4. Understanding Unscrambling Cause and Effect
    Ceteris paribus is a Latin term that means
    1. "All things being equal"
    2. "Other things being equal"
    3. "All things being different"
    4. "Other things being different"
  5. Fill in the blank:
    1. By varying one factor and holding all other relevant factors ___________, we can investigate the _____________ of the factor.
Topic Notes
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Positive Statements


A positive statement are statements that can be tested, changed, or rejected by checking it against facts.


Example: Higher interest rates will reduce house prices.


Normative Statements


A normative statement is a subjective statement of opinion which cannot be tested.


Example: The government should increase the minimum wage.


Unscrambling Cause and Effect


Ceteris paribus: other things being equal, or other things remaining the same.


In other words, we let one factor vary and hold the other relevant factors constant to investigate the effects of the factor in economic models. This will allow us to see the cause and effect.