Positive and Normative Reasoning:
1) Positive Reasoning:
This is concerned with describing and analysing the way things are or will be if certain conditions exist. For instance, the statement, “an increase in the demand for a commodity will cause its price to increase when other factors influencing demand and supply 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.
2) Normative Reasoning:
This, on the other hand, is concerned with what ought to be, particularly how problems should be solved. It is a subjective science that deals with those areas of human economic behaviour in which personal value judgements are made. Normative economics gives rise to statements such as, “money supply should be reduced to lower inflation rate in the economy.”