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Business economics normative in character. Why?

Business economics normative in character. Why?

Solution

Business economics is said to be normative in character because it is concerned mainly with "what should be" rather than merely "what is."

  1. Goal-oriented and prescriptive: it deals with the aims and objectives of a firm and prescribes the methods to achieve them, guiding a manager toward the decision that should be taken — for example, what price a firm should charge or how much it should produce.
  2. Involves value judgement: it evaluates whether a business decision is good or bad and recommends the most desirable course of action, rather than only describing facts as they are. Though it rests on positive economics ("what is"), its real purpose is prescriptive.

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