Which of the following represents an example of normative analysis?
A)How will the equilibrium price of coffee be affected by drought?
B)How will a government subsidy affect the quantity demanded of public housing?
C)What is the best method for allocating tax revenues?
D)How will a tax cut affect a typical consumer's disposable income?

Question

Quizplus · Accepted Answer

Normative analysis involves making value judgments and determining what ought to be done. Asking what is the best method for allocating tax revenues is an example of normative analysis. The other options (A, B, and D) are examples of positive analysis, which involves describing and predicting economic behavior without making value judgments. Normative analysis involves analyzing what ought to be, rather than what is. The question "What is the best method for allocating tax revenues?" is an example of normative analysis because it is asking for a judgment or recommendation about what should be done, rather than simply describing what will happen. Option A, B, and D are examples of positive analysis, which involves describing what is or what will happen.

Which of the Following Represents an Example of Normative Analysis