___________ is concerned with welfare proposition
Options
ANormative Economics
BPositive Economics
CBoth (A) and (B)
DNone of these
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Introduction to Business EconomicsMTP Nov 22Question 685 of 209
All Questions Correct Answer
✅ Option a — Normative Economics
All Options:
- ANormative Economics
- BPositive Economics
- CBoth (A) and (B)
- DNone of these
Detailed Solution & Explanation
• Normative Economics is a branch of economics that deals with "what ought to be" or "what should be." It involves value judgments, opinions, and prescriptions about how the economy should work.
• Welfare propositions, which discuss how to improve societal well-being, reduce inequality, or achieve a more desirable economic outcome, inherently involve such value judgments. For example, a statement like "the government should increase taxes on the rich to fund social programs" is a welfare proposition and falls under normative economics.
• Therefore, Normative Economics is directly concerned with welfare propositions because it focuses on evaluating economic outcomes and suggesting policies based on ethical considerations and societal goals.
• Positive Economics, on the other hand, deals with "what is" or "what actually happened." It focuses on factual statements, cause-and-effect relationships, and objective analysis that can be tested and verified. It avoids value judgments. For instance, "an increase in taxes will lead to a decrease in consumption" is a positive economic statement. It does not concern itself with whether this outcome is good or bad, only that it will occur.
• Since welfare propositions involve subjective judgments about what is desirable for society's well-being, Positive Economics, with its objective and factual approach, cannot address them. This makes option (B) incorrect.
• Option (C) is incorrect because Positive Economics does not deal with welfare propositions.
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 SyllabusExam 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.
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