Question : Statement 1: Normative economics involves making value judgments about the fairness and desirability of different economic outcomes.
Statement 2: Positive economics is based on objective analysis and focuses on explaining how the economy works.
Option 1: Statement 1 is true, and statement 2 is false.
Option 2: Statement 1 is false, and statement 2 is true.
Option 3: Both statements 1 and 2 are true.
Option 4: Both statements 1 and 2 are false.
Correct Answer: Both statements 1 and 2 are true.
Solution : (c) Both statements 1 and 2 are true.
Statement 1 is true: Normative economics involves making value judgments about what economic outcomes should be, based on subjective opinions about fairness and desirability. It deals with questions of what ought to be and involves ethical considerations.
Statement 2 is also true: Positive economics is based on objective analysis and focuses on explaining how the economy works. It seeks to provide an understanding of economic phenomena as they are, without making value judgments. Positive economics relies on data, empirical analysis, and economic theories to explain and predict economic behavior.
Therefore, both statements 1 and 2 are true.
