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

Microeconomics vs Macroeconomics

Once we know what economics is we come to its two major but inter-related fields, Microeconomics and Macroeconomics.

Microeconomics

In the most simple words we call it 'economics at an individual level'. After all micro means small and an individual unit is small part of an economy. we study the behavior of a consumer, the resource constraints he faces and how he makes his decision in allocating these resources. we talk about his satisfaction level

What is Economics?

A very Simple Definition of Economics would be that it is the "Science of Scarcity and Choice"

Scarcity means that resources are limited but fortunately, their use is not limited. A single resource could be used in multiple ways and people tend to use it in a way that provides more satisfaction. You may have 100 Rupees in your pocket. So you can buy a plate of Biryani at College canteen or eat a Burger, but you cannot buy both. so you are left with a choice to make.

Wait!. Does this means Mark Zuckerberg faces scarcity too? Yes he does, because money alone is not a resource. He has a limited tummy so he still faces a choice. The point is resources are not limited to money or finances but it is a very wide term. And the most important scarce resource would be 'time' that is equally scarce for rich and poor. 

Students may utilize their time in study or the same time can be allocated to watching movies or spent on social media. However, not even the best of students spent 24 hours in study knowing though that it is more beneficial? Neither do people on job spent 24 hours on their job to earn money rather then spend it. Is this behavior rational? Yes it is and we will know as we study economics answers to questions like this.

Now we know that resources does not means financial resources alone, so it would be wrong to say " Economics is the study of wealth/money". Economics studies human behavior and so it is a Social Science.