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CA Foundation · Business Economics · Nature and Scope of Business Economics

Which of the following statements is a normative statement in economics?

The statement that the government should reduce GST on essential medicines is normative. It expresses a value judgement about what ought to be done, whereas the other statements describe facts or testable cause-and-effect relationships and are therefore positive.

  1. AThe government should reduce GST on essential medicines to help poor householdsCorrect
  2. BInflation in India was higher in July than in June
  3. CA rise in the price of petrol reduces its quantity demanded
  4. DWheat output increased after the use of high-yielding seeds

Explanation

A normative statement expresses a value judgement about what ought to be, and the word 'should' signals this. The other options describe facts or cause-and-effect relationships that can be tested against data, so they are positive statements.

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