Positive economics describes "what is" - objective statements about economic facts and behavior. Normative economics prescribes "what ought to be" - subjective value judgments. Positive: "If income increases, demand increases" (testable, factual). Normative: "Income should be more equally distributed" (value-based, not testable). Positive statements are hypothesis-tested; normative cannot be verified scientifically. Examples: Positive: "Inflation increased by 5% in 2024." Normative: "We should reduce inflation." Both are important: Positive provides understanding; Normative guides policy. Business context: Positive analysis informs decisions; normative reflects company values. ICAI focuses on: distinguishing between statements, understanding limitations. Exam tip: Statements with "should," "ought," "good," "bad" are normative; those with measurable data are positive. Watch for trick options mixing both.