Normative economics can be best explained through:
Options
AFairness to tax
BIncidence to tax
CEffect of tax on incentives to work
DNone of these
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Introduction to Business EconomicsMTP Apr 23Question 728 of 209
All Questions Correct Answer
✅ Option a — Fairness to tax
All Options:
- AFairness to tax
- BIncidence to tax
- CEffect of tax on incentives to work
- DNone of these
Detailed Solution & Explanation
• Normative economics deals with "what ought to be" or "what should be." It involves value judgments and opinions about how the economy should work.
• Option (A) "Fairness to tax" directly addresses a value judgment. Deciding what constitutes a "fair" tax system involves ethical considerations and opinions, which is the core of normative economics. There's no objective, universally agreed-upon measure of fairness; it's a matter of perspective and societal values.
• Option (B) "Incidence to tax" refers to who ultimately bears the burden of a tax. This is a factual, positive economic question that can be analyzed and measured using economic models. It describes "what is," not "what ought to be."
• Option (C) "Effect of tax on incentives to work" is also a positive economic statement. It describes a cause-and-effect relationship that can be observed, measured, and analyzed empirically. It explains "what is" or "what will be" under certain conditions, without making a value judgment.
• Therefore, only "Fairness to tax" aligns with the definition of normative economics, as it involves a subjective judgment about desirability.
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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