Introduction
Positive, normative, micro and macro
Classify an economic statement as positive or normative, micro or macro.
Economics can study a question in two ways:
- Positive analysis asks how economic mechanisms work, and what results they produce: 'What is?' For example: 'If the price of rice rises, people buy less of it.'
- Normative analysis asks whether those mechanisms and results are desirable: 'What ought to be?' For example: 'Rice should be free for the poor.' It involves judgements.
The two are closely related, and the line between them is not very sharp.
Economics is also divided by scale:
- Microeconomics studies the behaviour of individual economic agents (consumers, producers) and single markets: for example, the price of one commodity.
- Macroeconomics studies the economy as a whole: total output, total employment, and the general price level (why prices in general rise).
In short: what is and what ought to be; the parts and the whole.
What is, what ought to be; parts and the whole.
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