Introduction to Business EconomicsMODULEQuestion 614 of 209
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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, without making judgments about whether they are good or bad. It deals with "what is" or "what will be." • Option (A) "an analysis of the relationship between the price of food and the quantity purchased" is a perfect example of positive economic analysis. It describes an observable economic relationship (the Law of Demand, where typically as price increases, quantity demanded decreases) and can be tested with facts and data. It doesn't suggest what the price *should* be, but rather how it *behaves*. • Options (B), (C), and (D) are examples of normative economic analysis. Normative economics deals with "what ought to be" or "what should be." It involves value judgments, opinions, and policy recommendations. • Option (B) "determining how much income each person should be guaranteed" involves a value judgment about fairness and social welfare, making it normative. • Option (C) "determining the 'fair' price for food" uses the word 'fair,' which is subjective and based on values, not objective facts. This is a normative statement. • Option (D) "deciding how to distribute the output of the economy" involves making choices based on societal values and goals, rather than simply describing how distribution currently occurs. This is also normative.

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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