BRANCHES OF ECONOMICS || POSITIVE & NORMATIVE ECONOMICS





By:  Senathon Ipia





Branches of Economics
Economics is divided into Microeconomics and Macroeconomics.

1. Microeconomics:  The prefix “micro” means “small” or “tiny”. So, microeconomics is the study of economics at the level of individual, business organization, or a segment of individuals or businesses in the economy (NOT all the individuals or businesses in the economy).

Areas in microeconomics include:
-Consumer Behaviour/Consumer Demand (For Households)
- Theory of Cost and Production (For Firms)

Note: The term “firm” is used to mean business organization and “household” to mean individual(s). Remember, we all come from a family.


2. Macroeconomics: The prefix “macro” means “big” or “large”. So, Macroeconomics is the study of the economy as a whole. 

Macroeconomics includes:
- study of national income
- general price level
- economic system

The table below further shows the difference between Microeconomics and Macroeconomics

 Microeconomics
   Macroeconomics
-individual income
 - national income
- individual consumption
 - aggregate consumption
- individual savings
 - national savings
- investment by a firm
 - aggregate investment
- output of a firm
 - national output
- price of a product/a factor of  
  production
 - general price level
- employment/unemployment in any 
  industry
 - aggregate employment
- import or export a product/a factor 
 
- aggregate import or export of a
  country

Note: 1. “Factor of production” may simply be shortened to ‘factor’.

          2.  The word “aggregate” means ‘summation of all in an economy’. For example, aggregate consumption means summation of consumption by all the households.



Positive Economics vs Normative Economics

Positive Economics is the description of economic facts and figures. 
This implies that Positive Economics is the “what is” of Economics.

Normative Economics is based on value judgment, that is, one’s opinion and values, which depends on one’s moral belief and ethical value.
This implies that Normative Economics is a suggestion of “what ought to be” of Economics.


The table below further shows the difference between positive and normative Economics.

 Positive Economics
   Normative Economics
- study of what actually is
 - a suggestion of what ought to be
- Descriptive
Positive economics describes facts and figures (data). Example, Nigeria was in recession in year 2016, is a positive economics statement.
- Prescriptive
Normative Economics gives a prescription. Example, to get out of recession, Nigeria should grow rice to meet local consumption and import none, is a normative Economics   
- Objective
What can be proven because facts and figures exist is said to be objective.
 - Subjective
What is not a fact is said to be subjective. Normative Economics is an opinion and not yet a fact
- Analyses Cause and Effect relationship
Example, Nigeria’s recession in 2016 was caused by a fall in crude oil price and the effect was economic hardship. 

 - It is based on value judgment . Nigeria would get out of recession if government supports agriculture. (This is someone’s opinion)   



THANK YOU

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