Mark the correct option :

Positive economics and normative economics are related to each other

The correct answer is option (4) : Positive economics and normative economics are related to each other

In positive economic analysis, we study how the different mechanisms function, and in normative economics, we try to understand whether these mechanisms are desirable or not. However, this distinction between positive and normative economic analysis is not a very sharp one. The positive and the normative issues involved in the study of the central economic problems are very closely related to each other and a proper understanding of one is not possible in isolation to the other.

Option 1: In Normative economics analysis, we study how the different mechanisms function. (This statement is incorrect. Normative economics deals with judgments about what should be, not how mechanisms function.)

Option 2: In positive economics analysis, we try to understand whether mechanisms are desirable or not. (This statement is incorrect. Positive economics is concerned with factual statements and analysis, not judgments of desirability.)

Option 3: Proper understanding of normative economics is possible without the understanding of positive economics. (This statement is incorrect. Normative economics often relies on positive economic analysis to inform judgments about what policies or actions should be taken.)

Option 4: Positive economics and normative economics are related to each other. (This statement is correct. Positive economics provides the data and analysis that form the basis for normative judgments.)