1. Bell work Based on what you learnt last lesson - on your own write a definition of economics on your post it note. How does your definition compare to your neighbours?

2. “Economics is a science which studies human behaviour as a relationship between ends and scarce means which have alternative uses.” Lionel Robbins on Economics

3. Objectives To understand the difference between Positive and Normative statements To apply your economic understanding so far

4. What is the distinction between positive and normative statements? How can value judgements influence economic decision making and policy?

5. Positive Statements A positive statement is a statement about what is and that contains no indication of approval or disapproval Notice that a positive statement can be wrong The tools of positive economics are reason, logic and empiricism Empiricism – doctrine that all knowledge derives from experience

6. Normative statements A normative statement expresses a value judgment about whether a situation is desirable or undesirable "Monetary Policy in the UK would be more effective if Geoff Riley was Governor of the Bank” Notice that there is no way of disproving this statement If you disagree with it, you have no sure way of convincing someone who believes the statement that he is wrong Statements that include indicator words such as: should, ought, or prefer are likely to be normative rather than positive

7. Positive or Normative? StatementPositive or Normative? 1The government should target poverty by switching to means-tested benefits 2A rise in the sterling exchange rate should lead to a decrease in the rate of inflation 3The National Minimum Wage should be raised to £5 per hour for all workers 4The introduction of a London congestion charge is unlikely to change motorists’ behaviour when deciding whether or not to use their car at peak times 5The Bank of England should cut interest rates to stimulate recovery in manufacturing 6A reduction in income taxes for low income families will improve the incentive to work and therefore reduce unemployment 7The Government should abolish Inheritance Tax 8The European Single Currency ought to lead to a reduction in price differentials between the UK and other European countries 9A rise in the price of petrol will lead to an increase in the demand for rail transport 10The government should extend the principle that patients should pay for many of the health treatments they receive under the National Health Service

8. Answers StatementPositive or Normative? 1The government should target poverty by switching to means-tested benefitsNormative 2A rise in the sterling exchange rate should lead to a decrease in the rate of inflationPositive 3The National Minimum Wage should be raised to £5 per hour for all workersNormative 4The introduction of a London congestion charge is unlikely to change motorists’ behaviour when deciding whether or not to use their car at peak times Positive 5The Bank of England should cut interest rates to stimulate recovery in manufacturingNormative 6A reduction in income taxes for low income families will improve the incentive to work and therefore reduce unemployment Positive 7The Government should abolish Inheritance TaxNormative 8The European Single Currency ought to lead to a reduction in price differentials between the UK and other European countries Positive 9A rise in the price of petrol will lead to an increase in the demand for rail transportPositive 10The government should extend the principle that patients should pay for many of the health treatments they receive under the National Health Service Normative