[Music] [Applause] [Music] [Applause] [Music] hey everybody how we doing today this is wes moore and i will be your instructor over the next few weeks on this macro economics course we're going to try to make this interesting for you we're going to try and make it fun it's a very very important subject and i want to try and make it easy for you to understand so let's go ahead and get started let's see what we're going to talk about here in session one session one is going to be about understanding economics basically what i want to do here is just introduce you to the idea and cover a couple of important uh subjects within the uh the larger subject of macro economics so what do we want to talk about this time just three things i want to talk about economics number one what is it what does the word mean and how do we understand what it is number two we want to talk about the difference between microeconomics and macroeconomics you're taking a macro economics course here but you may have already or you may in the future take a micro economics course what is the difference and then we want to talk about something that's very important to understanding economics whether you're talking about micro or macro and that is the idea of rational self-interest and rational self-interest just really has to do with how people make decisions it's an assumption that we make when we're studying economics that's very very important to everything that we're going to talk about no matter what the the sub-subject or sub-heading of economics is so what is economics what is economics a lot of people get afraid when they hear that term it uh draws to mind complicated graphs complicate complicated formulas and a lot of really difficult definitions but it's really not that hard a concept to understand let's start off by just considering the word economy forget that you're in a macro economics class now if if someone's asked you to define the word economy how would you define it well economy is really just about getting the most out of what you have getting the most out of what you have we use the term for example we talk about things like economy cars economy car well what do we mean when we're talking about an economy car this is a picture of a mitsubishi mirage here it's a little car it's a it's a good car but it's not really expensive so it's categorized as an economy car what does that mean it simply means that you get a lot of car for a little money with an economy car and that sort of gets at this idea here of what economics is when we're talking about markets and buyers and sellers and gdp and interest rates and all of that we're really talking about this whole idea of how do we get the most out of what we have when we all want more than we could ever possibly fulfill so let me give you a little picture here to help you illustrate help you understand what i mean we all realize that we have a limited amount of resources whether it's you individually in your your personal budget your your checkbook your check card you have only so much money but we only have so many trees we only have so many workers in the economy we only have so much land we only have so much coal and natural gas and that kind of thing but what we also recognize is that even though our resources are limited the wants that we have and the needs that we have are unlimited they are massive so the whole trick in economics the study of economics has to do with how we take get the most out of those limited resources given the idea in the reality that we want way more than we could ever possibly create produce or buy so a formal definition of economics is simply how people fulfill unlimited wants that's the big green circle with limited resources how do we take the stuff that we have distributed among our people in a way that efficiently uses what we have how do we fulfill limit unlimited wants with limited resources and this there's a very important idea in the definition and in the consideration of economics no matter how you're applying it and that's the idea of scarcity and we've already really hit on that a little bit but here's the way you can think about this scarcity idea in economics and how much would you have if everything was zero if everything cost zero if it didn't cost anything how much gasoline would you buy how how many tvs would you get how many uh songs on itunes would you download if everything cost zero well it's not hard to see that it wouldn't take very long for our virtual or physical shelves to become empty that we know that we would use up all that we have very very quickly if we didn't have a system for getting it out to people that needed it and not giving it out to everyone without any kind of qualification or measure at all this is the idea of scarcity that the resources that we have land workers labor hours trees electricity it's all scarce we don't have enough to cover everything we would want if the price was zero and that would be the formal more formal definition scarcity is when we want more than we would all have at zero dollars that means the the resource is scarce now economics applies to this idea of trying to figure out how we're going to supply unlimited wants with limited resources that applies to individuals you're doing that in your own budget if you've got a hundred dollars a week to spend you're trying to figure out how am i going to get everything that i want with little the little money that i have it also applies to families home economics home economics family economics how are we going to provide all that we need and all that we want with the scarce resources that we have but it also applies to nations how is the united states of america going to take its limited resources as much as we have it is still limited we have three more than 300 million people and so we don't have enough for everybody to have everything they want as if the price was zero so we have to have a system to distribute and give out things that people want without using it all up so we don't have any left so economics applies to to all of these groups of people individuals families and nations now what's the difference between macroeconomics and microeconomics this is actually very easy to understand let's just look at these these words here on the beginning of these compound words macro and micro micro simply means small so microeconomics is the study of how we fulfill these unlimited wants with limited resources in a small piece of the market and this would be on an individual or family basis that's a small piece of the market the full market is made up of all the buyers all the consumers but a micro market if you will is just an individual it's also has to do with small pieces of the market like the the demand for mountain dew or the demand for sodas you see an entire market is made up of the demand for every product but a micro economic market is just looking at a single market how do we determine demand in this market how is the demand of that market filled by all these suppliers that kind of thing that's micro economics looking at the small pieces of a market but then we have macro economics macro means large it means big big picture big scale big scope and so it's easy here to understand that this is talking about entire markets so it would be like national markets macroeconomics is the study of how a whole nation fulfills its unlimited wants and needs with its limited resources so when we're talking in this course about macro we're going to be talking about the entire nation an entire country as a whole entire national market we're not going to be looking at how individual buyers and sellers make decisions about production or decisions about purchasing or anything like that we're just going to focus on the large the big picture the macroeconomic environment now let's finish up this session by talking about something that's very important to economics as you go through this course and other economics courses you're going to find that they are all based on this simple idea of rational self-interest economics at its heart is the study of people how do people make decisions given the cost of things given the supply of things given the their thinking and fears or expectations about the future how do people make decisions that's really what economics is all about rational self-interest is really the idea that people make decisions that make sense that's the rational part rational means with your head with your brain not irrational like out of of anger or foolish ideas stupid decisions dumb decisions but the people are going to make decisions that make sense and that are in their own best interest that doesn't mean that people will be greedy it just simply means that you have to make the decision that's best for you and we're going to assume in economics that you're going to do that so rational self-interest is the assumption that people make decisions that make sense and that are in their own best interest let's take the uh example of a camera let's say that there was a man who wanted to buy a new camera let's apply the principle of rational self-interest to that purchase first of all let's say that uh he was comparing the different specifications on these cameras and he realized that one had a greater storage capacity digital storage capacity than the other well in irrational way rational self-interest we're going to assume that he's going to conclude that having more storage in his in his camera is better than less storage it wouldn't make any sense for him to assume that less storage was better you see that's rational all right and the self-interest part is that he is going to make this decision based on what's best for him and not what's best for the guy selling it to him let's say that he finds the same camera on three different sellers on amazon it's the same camera with the same specs well he's going to then choose whichever one is best for him in terms of its price availability shipping those kinds of things he's not going to think about who at amazon needs the order the most that's what the seller is going to think about that will be his self-interest but it will not be in the buyer self-interest to consider who needs the order the worst he won't do that so in economics we're always assuming that every individual player in the market every individual actor is looking out for his or her own best interest and this includes very important players like individuals business owners the government and investors all the people that are making these decisions about economic type uh factors they're going to be thinking about their own self-interest and they're going to thinking about that in a rational way or a way that makes sense and this is going to be key to understanding and predicting economic activity when we start talking about what is going to happen if the price rises what is going to happen if the price falls what is going to happen if interest rates go up what's going to happen if the government spends money all of those things are are going to be understood best when we understand that the rational self-interest principle applies so this is the end of the first session in session two we're going to go a little bit further and we're going to talk about economic systems and some other key terms this in this session we'll get into socialism and capitalism in a basic way and some other key concepts so i hope you will join us for that session thank you very much [Music] [Applause] [Music] [Applause] [Music]