Videos on Econometrics

 Here are some video lectures on Econometrics

Is Consumer Price Index (CPI) and Inflation the same thing?

Consumer Price Index (CPI) and Inflation are often confused with each other but they are not the same thing.

Consumer Price Index (CPI)

It is an index number that gives us a general idea about the price level in a country. This index number is made using prices of a specific number of goods that a typical consumer in a country would use. This index is calculated using weight of each good according to its importance. such indexes are usually made with a base year. CPI is Stock  calculated for many purposes and that includes inflation.

Inflation.

Inflation is an overall increase in the price level of a country. Mathematically Inflation is the percentage change in CPI over a period of time. If suppose CPI in 2015 is 100 and CPI in 2016 is 110 then inflation for the year is 10 percent.

you can explain the difference of CPI and Inflation as Stock vs Flow concept.

Some points worth noting

1. CPI is not the only index used for calculating price level. there are other indexes which serves the same purpose but with a little bit of variations. Wholesale Price Index (WPI) for example is also an index measuring price level but using prices of wholesale products.

2. Inflation can be calculated WPI and GDP deflator as well.

Types of variables ( Real vs Nominal)

Imagine A very simple country where only bread is produced and the production of bread requires labor and capital. Let say price of bread in this simple economy is 20 rupees. We also initially assume that the worker who are providing labor are paid a wage of 10 rupees per hour. If the firms increases prices of bread by 20 rupees it now receives more revenue. So the firm decides to keep the worker
happy by increasing their wage from 10 to 15 rupees. How much did the workers gained?

'Gross Domestic Production' defined

Gross Domestic Production

Gross domestic production is defined as " The monetary value of all final goods and services produced within an economy during a given period of time"

Explaination

The definition might simple as it seems but there are some important key concepts that needs to be taken care of. we will look into these concepts below

Monetary value

While gross domestic production is all about production of goods and services we normally represent it in monetary figures. Why don't we use the actual units in which it was produced. for example we could say 24,500 billion tons of wheat produced in 2014 rather than mentioning it in monetary units say rupees.

Types of Variables (Stock vs Flow)

One of the various types of variables that we encounter in economics is the Stock and Flow variable. The main difference between these variables is the way they are measured with respect to time. Lets see how

Stock Variable:

 'Variable that is measured at a specific POINT IN TIME' it might be a specific Month, Date, or a specific minute. Simple daily life example would be

Is Economics Normative or Positive?

You can mostly distinguish normative and positive statements of economics from the type of questions it answers.

Normative economics is all about questions such as "What Should be?"
Positive economics deals with questions such as "What is?"

Let us understand them in more detail.

Economics, Models and Reality

Economic Models

Have you ever observed children playing together when they make a small mud or wooden house? If you watch them closely they would take roles of some elders. they will pretend to go to office, they pretend to cook and have some tea together in mini cups. But if you closely hear them their stories are all built on assumption which are continuously made as the story progresses. you will constantly hear them make suppositions, like "suppose Ali comes to my house" or " Suppose Ali and Aleena are brother and sister" and all such assumptions