Explanation
The question for "How to produce?" is faced by the economy they should consider both labour intensive techniques as well as capital intensive techniques depending upon the availability of resources in the economy.
Production possibility curve shows all the different attainable combinations of production of two commodities that can be produced in an economy with the given resources and technology, when they are fully utilized. So, if there is improvement in the technology for a respective commodity, then the production of that commodity rises and PPC shifts on one end.
A normative statement offers suggestions or opinion- this is a true statement. Normative statements explains what should be based of the subject according to the belief through valued judgement i.e. dos and don'ts that describes the fairness of the subject on public policy.
Positive statements refers to those statements that describe matters which have been proven through facts and figures after careful observations and are verifiable. Therefore, the statement given above is a positive statement.
The central economic problems rise for the basic fact that the resources in the economy is scarce whereas the wants are unlimited. Therefore, it deals with the efficient allocation of the resources for the production of goods and services in the economy and regulations/intervention of the government can do little about central economic problems.
The beliefs of individuals expressed in the form of value judgments based on moral and ethical considerations are termed as normative statements. These statements that describe what ought to be on the basis of ethical considerations are the subject matter of normative economics.
Alfred Marshall was a British economist who proposed the definition of welfare according to which economics should be a science of creation of welfare for both human as well as society believed that the subject studies the creation of materialistic things in the economy for personal gains which is not good for the welfare of the society. Therefore, he proposed a normative definition on economics.
In a socialist economy, the central problems of the economy is solved by a centrally based planning authority that resolves all the centrally based problems related to production of goods and services in the economy which includes the problem of 'What to produce? Consumer goods or capital goods?' which is decided keeping in mind the needs of the people i.e. consumer goods and national priorities i.e. capital goods.
In a socialist economy, the central problems of the economy is solved by a centrally based planning authority that resolves all the centrally based problems related to production of goods and services in the economy which includes the following
In a socialist economy, the price mechanism i.e. price affects the demand and supply of the commodities is directed by a centrally based planning authority that controls the price mechanism to certain limits and regulates it to protect civilians from fraudulent practices.
In a mixed economy, price mechanism are intervened by the government through many policies which includes industrial policy i.e. industrial acts, wage rate system etc, fiscal policy i.e. taxation policy on goods and services, and monetary policy i.e. central bank's qualitative and quantitative policy.
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