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Normative and Positive Economics - Essay Example

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Positive economics is different than normative economics because these types of economic statements are based solely on opinion and they do not consider fact or economic theories. An example of a positive economic statement is: I believe that the current employment rate has gone up due to the poor job of the Obama administration. Due to the various opinions of analysts and economists I believe the most utilize of these two methodologies is positive economics. In reality normative economics has greater validity. As far as official governmental data the use of normative economics due to its validity is used more often. There is a clear relationship that exists between ethics and economics. Positive economics is often used by governments to establish economic polices. In this process ethics plays a big part because governments have to decide how to allocate resources. Is it ethical to eliminate welfare benefits in order to reduce taxes to the middle and upper class? Should environmental regulation be reduced in order to lower business costs in America to increase job creation? These are some of the ethical questions associated with positive economics. Normative economics also must consider ethics. A person should not make economic opinions that do not consider the ethical implications of the statement. The following normative statement is not ethical: The unemployment rate among Afro-Americans is so high because they are lazy. DQ2 Market efficiency is needed for scarce resources to be allocated

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efficiently among the participants of an economy which usually implies the population of a nation. The United States has one of the most efficient economies in the word. The United States economy is classified as a free market. In such an economy the government does intervene, but not as much as in a command economy. I believe that government intervention is needed to achieve market efficiency. The distribution of income is not equally distributed among the participants of a market. In order to level out the playing field the government implements mechanisms such as tax systems to take out a portion of the wealth of the middle and upper class with the objective of using that money to distribute it back to the poor, disable, and elderly through programs such as welfare, social security, and Medicaid. Ethics plays a big role in market efficiency. For instance the government has to decide how to allocate resources based on need. Another ethical consideration of an efficient market is what types of regulations the government implements. If the government reduces environmental laws to lower business costs in the United States the decision may be unethical since such a move would adversely affect our natural environment. DQ3 “Economics is the study of how society allocates scarce resources and goods” (Cliffnotes, 2011). Based on that definition one would think that scarcity is a key element of the applicability of economics, but resources that are not scarce typically have a price of cero. It would be hard for me to imagine a world in which everything was free. That type of mentality is associated with concepts such as utopia which is an ideal or perfect society. Based on the reality of the world having limited resources a lack of scarcity is something that will never occur. Things are just getting scarcer. I recently read an article that stated the earth has a capacity to generate food for a maximum of 10 billion people and I believe I will live in such a world when I get older since
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Summary

DQ1 Normative and positive economics refers to positions in regards to economic statements. Positive economics deals with facts or questions in regard to how things should be. When a person makes a positive economic statement biases or emotions cannot be a part of the equation…
Normative and Positive Economics
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