The correct option is 2 only.
Explanation
Economic analysis is generally categorized into two distinct approaches: Positive Economics and Normative Economics. Positive economics deals with objective explanations and the testing of theories ("what is"), whereas normative economics involves value judgments and prescriptions regarding economic policies ("what ought to be").
Statement-wise Analysis
- Statement 1 is Incorrect. Describing economic mechanisms as they are, without evaluation or judgment, is the definition of Positive Economics. It focuses on facts and cause-and-effect relationships. Normative economics, conversely, evaluates these mechanisms based on ethical standards.
- Statement 2 is Correct. Normative economics explicitly deals with values and opinions. It asks subjective questions such as "Is this mechanism desirable?", "What should happen?", or "Is this policy fair?". It aims to prescribe solutions based on societal goals.
- Statement 3 is Incorrect. While the two concepts are distinct, they are not strictly separated without relation. Normative economics relies on the factual findings of positive economics to make informed value judgments. For instance, determining whether a subsidy is "desirable" (normative) requires understanding its actual impact on the market (positive).
Key Takeaway
Positive Economics is objective and descriptive (dealing with facts), while Normative Economics is subjective and prescriptive (dealing with value judgments and desirability).