Introduction to economics

Hi. My name is Mariano Torras. I'm a professor of economics at Adelphi University in New York. We're going to be doing a lecture series on macroeconomics.

Let's start at the beginning. What is economics? Some expect that economics is a study of money and how it is used. While there's no question that money is important. Indeed indispensable for modern economies, money is not what economics is fundamentally about. Others suppose that economics is a study of how businesses operate. Yet, even this is not quite right. While businesses exist and function in the economic realm, economics as a field of study goes far beyond the study of business. So, what is economics?

Economics is a study of how we, that is individuals and groups, make do with what we have. What does this really mean? Basically, economics concerns real things, people, jobs, goods, and services, for example. The flow of money is what facilitates the necessary decisions and transactions that create jobs and things for people. This is why while money matters economics is not fundamentally about money. Saying that economics is the study of how we make do with what we have means that it concerns how we utilize our factors of production, which is a term that means economic inputs, like human labor, productive capital, or natural resources, in the production of finished goods and services. One of the most important things to consider is that we hope to utilize our factors of production as efficiently as possible in producing these goods and services. Why? Our resources, that is, our factors of production, are not unlimited. The economists say that they are scarce. So, in making do with what we have, we are faced with numerous choices about how we use these factors, and since the factors are scarce, we want to economize on them. If we are successful at economizing, we are being efficient. Through most of our history,