Positive Versus Normative Analysis

First of all , let use define what positive and normative analyses mean . A positive analysis is to deal with the question of "what is " and no indication of approval or disapproval .Basically , the positive analysis focuses on facts and cause-and-effect relationships . A positive analysis will predict the changes in economic phenomena such as production , consumption , and consumer's income due to changes in government policy . For example, suppose that the Malaysian government removes its subsidies for petrol and diesel . What is the impact on the consumers and automobile industry ? Will consumeers prefer bigger or smaller cars ? What is the impact on the transportation industry as well as tourism industry ? Will this subsidy removal increase the price of other related goods ? All these are called positive analysis because we need to analyze the cause-and-effect relationship .

  On the other hand , a normative analysis is to deal with the question of "What ought to be " . The normative analysis incorpporates value judments about what the economy should be or what policy should be  used to achieve economic goals . Pertaining to the same situation , question such as " should the car manufacture produce a more fuel efficient car ? " or should the goverment impose lower corporate tax  on oil producing companies ?" will arise . All these are statements in normative analysis .