Distinguish between positive and normative approach in economics. Of what significance is this distinction to the making of economic policy, b) Explain the usefulness of the concept of elasticity

a) Positive and Normative Economics:

Positive economics is an approach based on the analysis of factual evidence. It involves the development and testing of economic theories. Positive economics deals with "what is" or "what exists" in reality. For example, if unemployment rate rises, positive economics would analyze why and how it happened.

On the other hand, normative economics is based on value judgments, personal opinions, and subjective data. It deals with "what ought to be" or "what should be". For example, if unemployment rate rises, normative economics would suggest what should be done to reduce it.

The distinction between positive and normative economics is significant to the making of economic policy because policy decisions often involve normative economic judgments. For instance, when deciding on the appropriate level of unemployment, policy makers need to consider not just the positive economic facts, but also normative judgments about what level of unemployment is acceptable.

b) Usefulness of the Concept of Elasticity:

The concept of elasticity is useful in economics because it measures the responsiveness of demand or supply to changes in price or income. It helps in understanding how changes in prices will affect the demand and supply of a product.

1. Price Elasticity: It helps businesses to predict the impact of a change in price on their sales and revenues. If a product is price elastic, a small change in price will lead to a large change in quantity demanded. If a product is price inelastic, a change in price will not significantly affect the quantity demanded.

2. Income Elasticity: It helps to understand how changes in income will affect the demand for a product. If a product has high income elasticity, demand for it will increase more than proportionately with an increase in income.

3. Cross Elasticity: It helps to understand the relationship between two products. If two products are substitutes, an increase in the price of one will increase the demand for the other.

Overall, the concept of elasticity is crucial for decision making in businesses, government policies and consumer choices.