Q.What do you understand by positive economic analysis?

Positive economic analysis deals with what is — it describes and explains economic phenomena as they actually occur, without passing judgment on whether they are good or bad. This branch of economics focuses on establishing cause-and-effect relationships that can be tested against facts and data.

When an economist makes a positive statement, she is making a claim about the world that can, in principle, be verified or refuted by looking at evidence. For example, "an increase in the minimum wage will reduce employment of low-skilled workers" is a positive statement because we can examine labor market data to check whether it holds true. Notice that the statement does not say whether raising the minimum wage is desirable — it simply predicts a consequence.

Positive analysis forms the foundation of economic science. It seeks to answer questions like: How does a tax on petrol affect its consumption? What happens to inflation when the central bank raises interest rates? Will a subsidy on fertilizers increase agricultural output? Each of these can be investigated objectively. …

Positive economics is the branch of economic inquiry that concerns itself with facts, cause-and-effect relationships, and verifiable propositions. It asks: What actually happens in the economy? How do variables relate to one another? What are the consequences of a particular policy or event? The hallmark of positive analysis is that it can, in principle, be tested against real-world data and either confirmed or refuted.

Consider the statement "An increase in the minimum wage will reduce employment in low-skill sectors." This is a positive claim. It predicts a specific outcome and can be examined empirically by looking at employment data before and after minimum-wage changes. Whether the prediction turns out to be true or false, the statement itself is positive because it deals with observable reality, not with whether the outcome is good or bad.

Contrast this with normative economics, which deals with value judgments and prescriptions — "what ought to be." A normative statement might say "The government should raise the minimum wage to ensure workers earn a living wage." That claim rests on ethical beliefs about fairness and cannot be tested in a laboratory or with data alone; reasonable people can disagree based on their values.

Positive analysis underpins much of economic theory. When we derive the law of demand — that quantity demanded falls as price rises, ceteris paribus — we are making a positive claim about consumer behavior. When we model how fiscal deficits affect interest rates, or how exchange-rate depreciation influences exports, we are building positive frameworks that can be confronted with evidence. …