Introduction to Business EconomicsMTP Nov 23Question 613 of 209
All Questions

An example of 'positive' economic analysis would be:

Options

Aan analysis of the relationship between the price of food and the quantity purchased.
Bdetermining how much income each person should be guaranteed.
Cdetermining the 'fair' price for food.
Ddeciding how to distribute the output of the economy
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Correct Answer

✅ Option a — an analysis of the relationship between the price of food and the quantity purchased.

All Options:

  • Aan analysis of the relationship between the price of food and the quantity purchased.
  • Bdetermining how much income each person should be guaranteed.
  • Cdetermining the 'fair' price for food.
  • Ddeciding how to distribute the output of the economy

Detailed Solution & Explanation

• Positive economic analysis focuses on describing and explaining economic phenomena as they are, based on facts and cause-and-effect relationships. It deals with "what is" or "what will be," without making value judgments. • Option (A) is correct because it describes a factual relationship: how a change in the price of food (cause) affects the quantity of food people buy (effect). This is an objective statement that can be tested and verified using data, making it a perfect example of positive economic analysis. It doesn't suggest what the price *should* be, only what happens when it changes. • Normative economic analysis, in contrast, deals with "what ought to be" or "what should be." It involves value judgments, opinions, and policy prescriptions. • Options (B), (C), and (D) are examples of normative economic analysis. • Option (B) "determining how much income each person should be guaranteed" involves a value judgment about fairness and social welfare. • Option (C) "determining the 'fair' price for food" also requires a subjective judgment about what constitutes 'fairness'. • Option (D) "deciding how to distribute the output of the economy" is a policy decision based on societal values and goals, not just objective facts. • Therefore, only option (A) fits the definition of positive economic analysis, as it is an objective, testable statement about an economic relationship.

About This Chapter: Introduction to Business Economics

Paper

Paper 4: Business Economics

Weightage

5%

Key Topics

Meaning, Scope, Price Mechanism

This chapter lays the groundwork for understanding Business Economics as a discipline. It covers the meaning, scope, and nature of economics — including key distinctions like Microeconomics vs Macroeconomics, Positive vs Normative economics, and the fundamental economic problem of scarcity. Students learn how businesses use economic principles for decision-making in a competitive marketplace.

View Official ICAI Syllabus

Exam Strategy Tip

Focus on definitions and distinctions between concepts. Questions often test whether you understand the difference between Micro and Macro, or Positive and Normative statements.

Related Comparison Tables

Microeconomics vs Macroeconomics: The Complete CA Foundation GuidePositive vs Normative Economics: Fact vs Opinion

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