Answer to Question #182634 in Economics for Pheliwe

Question

Discuss briefly whether development domains are separate from each other or not?

Answer 1

Depending on the goals of research in economics, two areas can be distinguished: positive economics and normative economics.

Positive economics examines the real logic of decision-making by people and firms. For example, she might investigate how companies operate to maximize profits, or how households manage their income. The reports of positive economists reflect the results of an analysis of what actually happened in the economy and what is happening, as well as projections of future development based on observations. The validity of their judgments can be easily verified. Examples of the conclusions of a positive economy are statements that with the growth of people's earnings, their savings grow, with the intensification of advertising of a product, the demand for it increases, and with the development of digital technology, the demand for e-books increases. The researchers' recommendations are aimed at helping economic actors find the most beneficial solutions.

Normative economics is looking for the most effective ways to achieve the goals that society sets for itself. For example, it can develop business rules that encourage the creation of energy-efficient equipment. Or it may look for ways to make saving natural resources profitable and unprofitable environmental pollution. In dealing with such problems, economists are influenced by policy recommendations that largely determine what should and should not be done.

There is no strict boundary between these two directions, since normative economists look for such changes in the conditions of economic activity, after which the set goal can be achieved.