SOCIAL SCIENCE 5: ECONOMICS

POSITIVE AND NORMATIVE ECONOMICS | MODULE NO. 4 LESSON NO. 4.1

At the end of this module, you will be able to:

1. differentiate normative and positive economics;

2. identify the uses of positive and normative statements; and
3. critique some statements using positive and normative analysis.

Suggested Time: 1 min | Actual Time Spent: ____min(s)

Part of the study of Economics is to know the condition of various finite resources, so that
appropriate policy will be made and implemented to achieve economic efficiency. With that in mind,
have you heard these words? “Dapat mabigyan tayo nang trabaho ng gobyerno para makaahon sa
hirap” or “the inflation rate of the Philippines increases by 3 % compared to last year.”

Familiar? Now, let us discover the difference between the lines and why it’s important to
unravel these economic concepts.

Suggested Time: 2 mins | Actual Time Spent: ____min(s)

In studying Economics, you will encounter the two branches of economic reasoning, positive
and normative economics. According to Samuelson & Nordhaus (2010), Positive Economics refers to
the facts of an economy, while Normative Economics encompasses value judgments like ethical
percepts and norms of fairness.
Positive economics also targets to elaborate as to how society makes decisions about economic
activities such as production, distribution, consumption, spending, and trade. In short, positive
economics focuses on looking at the lenses wherein objectivity, scientific explanation, logical,
empirical, and factual are the primal considerations. It describes the mechanism of the economy. While
normative economics focuses on value judgment and opinion. In other words, what we people perceived
as correct and true includes subjectivity in every line of reasoning. Concern on what ought to be and
cannot be tested falls in the line of consideration.

PSHS Social Science 5: Economics | Page 1 of 5

 Positive Normative
statements statements
are are
descriptive. prescriptive.
,

Claims that Claims that

attempt to attempt to
describe the prescribe how
world as it is. the world should
be.

Source: Mankiw, illustrated by the author.

Moreover, these two economic reasoning are used to formulate policies. In short, while they
are distinct, these two work together. While it is true that the government will use various economic
concepts, it also wants to test its applicability in the real world and still consider the individual, cultural
and collective sentiments of the people. Thus, policymakers will have to push their arguments in the
end. Furthermore, in the realm of politics, a normative statement is applied by the politicians to gain
and acquire favor from the people rather than just using the positive statement.
See the examples below.
 It’s cloudy.  People are ought to help each other.
 Innovation in technology prompted  Mobile phone gadgets are in dire
the increase in sales revenue of many need to facilitate learning today.
companies.
 The 11,000 workers of ABS-CBN  The government should provide
cause a rise in the natural occupation to jobless workers of ABS-
unemployment rate of the country. CBN, to lessen the effect of the said
cessation and still have moral
hegemony amongst affected.

You may watch this short video presentation about normative and positive economics.:

https://youtube/AV_p_QntywA
Suggested Time: 10 mins | Actual Time Spent: ____min(s)

Let us gauge your understanding of the lesson presented. Kindly answer the following activity.
This is a graded assessment.

PSHS Social Science 5: Economics | Page 2 of 5

Activity 1: Defend Me Statement (50 points)
Instructions: Evaluate the following statements and identify if it falls on a positive or negative
statement. Justify your answer. Your answers will be graded using the rubrics that follows.
Suggested Time:15 mins | Actual Time Spent: ____min(s)

Description of econ-statement Your stand/answer Justification/Explanation

1.The Philippine government should
shoulder all expenses of COVID-19
patients.
2.A higher interest rate will reduce the
demand for loanable funds.
3.If the government will increase the
subsidy grants to COVID-19 affected
areas, then, the cases will be
lessen/lowered.

4.Approving the anti-terrorism bill will

reduce the terrorism activities in the
country.
5.The use of an online learning system to
still develop the human resources of our
country amidst the COVID-19 pandemic
is necessary.

Rubrics:

Criteria Excellent Very Good Fair Needs

5 4 3 Improvement
2
All economic ideas Most economic
Some economic
are relevant and ideas are relevant The economic
Content ideas are
able to provide a and able to provide idea is
5pts relevant and able
logical explanation a logical provided and
to explain the
of the economic explanation of the not supported
economic
situation/s. economic by facts.
situation/s.
situation/s.

Descriptive Clear, suitable, Somewhat Details have No illustrative

justification and appropriate suitable and illustrative examples.
and justification and appropriate examples and
explanation explanation justification and justification
5pts explanation

PSHS Social Science 5: Economics | Page 3 of 5

 To summarize, there are two branches of economic reasoning: positive and normative.
Positive is based on logic and evidences that can be tested. While normative is based on a value
judgment that cannot be tested. Positive deals with what is and normative with what should be or
what ought to be.

Enrichment: Assume the role of a news reviewer, read the news article entitled “Lapid files bill to
protect delivery drivers from unjust order cancellations” and then critique the content using positive
and normative statements. See Attachment 1. This is non-graded

Suggested Time: 2 mins | Actual Time Spent: ____min(s)

Attachment 1: Lapid files bill to protect delivery drivers from unjust order cancellations

Read more:
https://newsinfo.inquirer.net/1306529/lapid-files-bill-to-protect-delivery-drivers-from-unjust-order-
cancellations#ixzz6SBJUozkm

By: Cathrine Gonzales - Reporter / @cgonzalesINQ

INQUIRER.net / 10:28 AM July 14, 2020

MANILA, Philippines — Senator Lito Lapid has filed a bill seeking imprisonment of up to six months
and a fine not exceeding P100,000 for customers who will make unjustified cancellation of orders in
food and grocery delivery service platforms for at least three times a month.

Lapid filed Senate Bill 1677, which seeks to protect delivery drivers by requiring food and
grocery delivery service providers to set up a mandatory reimbursement scheme for unjust cancellation
of orders. “If a customer cancels for at least three (3) times in a period of one (1) month, he/she, upon
conviction, be subject to the penalty of arresto mayor or imprisonment of one month and one day to six
months, the bill stated.”

Lapid noted that a growing number of Filipinos opt to avail of delivery services for food and
other items amid the coronavirus disease 2019 (COVID-19) pandemic when the public is advised to
stay at home. Some delivery service drivers, however, have been victimized by unjustified cancellation
of orders and even of “no-show” customers, even if the drivers have already paid for the ordered items
in advance.

“Masakit isipin na sa kabila ng panganib na hinaharap ng mga delivery rider para lamang
makapagserbisyo sa mga customer at kumita ng maliit na halaga, sa huli, sila pa ang naloloko,” Lapid
said in a statement on Tuesday. (It is painful to think that despite the danger faced by delivery riders for
the sake of serving customers and earning meager income, they are sometimes being duped.) “Bukod
sa nasasayang ang oras at salapi ng mga riders dahil sa pagkansela ng order, ang mas malala pa, may
mga pagkakataon na ni hindi matunton ang address ng nanlokong customer dahil sa fake address.
Hindi tuloy sila mapanagot at naiiwang lugi at abunado ang mga delivery riders,” the senator added.
(Aside from the time and money wasted because of canceled orders, some customers also can't be
located since they give fake addresses. Thus, they cannot be held liable and the delivery riders will have
to shoulder the expense.)

PSHS Social Science 5: Economics | Page 4 of 5

 Lapid pointed out that the bill will require delivery service providers to establish a
reimbursement scheme for the delivery drivers in case orders are cancelled. Reimbursement to the
drivers should be made within one day from the cancellation under the bill. To facilitate collection
against customers who cancel orders, the bill also requires delivery service providers to implement
know-your-customer rules which include the submission and verification of proof of identity and
residential address subject to compliance with the Data Privacy Act of 2012. Under the bill, food and
grocery delivery service providers that will fail to set up a reimbursement scheme will also be penalized
with a fine not exceeding P500,000 and double the amount of money not reimbursed to delivery drivers.

References:
Fathima, J. S. ( 2014). Positive versus Normative Economics- An Empirical Study. Shanlax International
Journal of Economics Vol. 3 number 1. Retrieved from
http://www.shanlaxjournals.in/pdf/ECO/V3N1/ECO_V3_N1_009.pdf
Mankiw, G. N. (2007). Principles of Microeconomics 4th Edition. USA: Thomson Higher Education.
Samuelson, P. A & Nordhaus, W. D. (2010). Economics 9th Edition. New York: McGraw Hill
Education.

Online websites
Lumens Learning (n.d.). Microeconomics:Choice in a World of Scarity. Retrieved from
https://courses.lumenlearning.com/wmopen-microeconomics/chapter/positive-and-normative-
statements/
Concept Version 8 Created by Boundless (n.d). Normative and Positive Economics. Retrieved from
http://oer2go.org/mods/en-boundless/www.boundless.com/economics/textbooks/boundless-
economics-textbook/principles-of-economics-1/economic-models-43/normative-and-positive-
economics-161-12259/index.html
Gonzales, C. (July 14, 2020). Lapid files bill to protect delivery drivers from unjust order cancellations.
Philippine Inquirer. Retrieved from https://newsinfo.inquirer.net/1306529/lapid-files-bill-to-protect-
delivery-drivers-from-unjust-order-cancellations#ixzz6SBJUozkm

Prepared by: Metchelle A. Malinog Reviewed by: Rodigar L. Alimurong

Position: SST II Position: SST II
Campus: PSHS-CMC Campus: PSHS-CLC

PSHS Social Science 5: Economics | Page 5 of 5