Distinguishing Normative and Positive Economic Statements

Steps:

• Positive statements describe what is (factual, testable predictions); normative statements prescribe what ought to be (value judgments).
• Statement 1 claims a price rise is "the best way" to improve living standards, involving subjective opinion on desirability.
• Statement 2 states a price rise "will lead to" lower demand, a testable prediction based on the law of demand.
• Thus, statement 1 is normative, statement 2 is positive, matching option B.

Why B is correct:

• B identifies statement 1 as normative (value-laden "best way") and 2 as positive (empirical cause-effect via demand law).

Why the others are wrong:

• A: Labels both normative, but statement 2 is a factual prediction, not opinion.
• C: Reverses classifications; statement 1 is opinion-based, not factual.
• D: Calls both positive, but statement 1 involves subjective judgment, not testable fact.

Final answer: B