positive and normative statement

• What is the primary difference between a natural science and a social science?

  Observation of universe vs. human behavior
• Economics is a social science because it studies human behavior
• Economics is a science because its theories are tested against real-world evidence.
• When prices fall, consumers typically spend more
• Steps in the process of developing an economic theory, such as demand theory.

  1️⃣ Observe patterns of consumer behavior

  2️⃣ Form a hypothesis

  3️⃣ Make precise predictions

  4️⃣ Collect evidence to test predictions

  5️⃣ Accept or reject hypothesis
• If evidence falsifies a prediction, the hypothesis is rejected and revised.
• What is the law of demand based on evidence collected by economists?

  Consumers spend more when prices fall
• Exceptions to the law of demand include gifting goods and Veblen goods.
• Gifting goods are purchased more when their prices increase due to income switching from other goods.
• Why do consumers purchase Veblen goods even when their prices are high?

  To signal status
• Positive statements in economics can be backed up or falsified by evidence.
• What are normative statements in economics based on?

  Value judgments
• Normative statements can be tested using real-world evidence.

  False
• Economics avoids normative statements because they cannot be tested against facts.
• What is the primary focus of positive statements in economics?

  Testable evidence