Positive and Normative Economics:

Economics analysis can be divided into two - positive economics and normative economics.

Positive economics is concerened with describing and analyzing the way things are or things will be if certain conditions exist. For instance, the statement, an increase in demand for a commodity will cause its price to increase when other factors influencing demand and supply condition remain unchanged is a statement in positive economics. In other words, positive economics is an objective science, which provides explanations of the working of the economic system.

 Normative economics, on the other hand, is concerned with what ought to be, particularly how economic problems should be solved. It is a subjective science dealing with those areas of human economic behaviour in which personal value judgements are made. Normative economics gives rise to statmeents such as 'money supply should be reduced to lower inlcation rate in the economy'.