Positive Economics: Economics is a science, however in exact. As regards the nature of science there is a school of thought which says that economics should confine itself to pure science so that it may not indulge in value judgment. In case of pure and positive science the analysis is confined to cause and effect relationships. In other words, it deals only with 'what is" and not what ought to be. It is said economics is not to suggest but simply state in terms of cause and effect relation and leave the matter of choice to the individual concerned. According to Robbins 'Economics is neutral between ends'. Neutrality between ends denotes lack of concern about objectives or goals, which may be noble or otherwise. It is not for economists to pass value judgments. Economics only studies facts and makes generalizations from them. An Economist, being a scientist, tries to study economic phenomena in a dispassionate and unbiased manner. Complete neutrality between ends is, however, neither feasible nor desirable.
Normative Economics: If economics is a normative science it would work for finding what ought to be. The focus will be on the idealistic aspect of the situation or phenomena.
Professor A C Pigou has put the importance of normative aspect of Economics very beautifully, “our impulse is not the philosopher's impulse, knowledge for the sake of knowledge but rather the psychologist's knowledge for the healing that knowledge may bring." It is a positive statement that 26.4% people live below poverty line in India. It is a normative statement that poverty should be eradicated. Both are important. As by both statements we shall get to know the gap we need to bridge and we shall be able to formulate policies accordingly.