how do you use time machine to set up a new computer

I suggest that you visit Pondini's Time Machine FAQ for help with Time Machine. There you should find a specific answer to your question.

Mac Basics- Time Machine backs up your Mac

Mac Basics- Time Machine

Mac 101- Time Machine

You will need a full system backup by Time Machine that is recently updated. My suggestion is that you use what is already on the new machine. Use Time Machine only to restore your user account. You can easily do that by selecting the option to restore a Time Machine backup while you are in the Setup Assistant. It appears when you first turn on the new computer.

If you want only the illustrated glossy version of the explanation, Pondini's site (which Kappy already suggested) has this specific article that goes directly to your issue:

OSX Tips: Setting-up a new Mac from an old one, its Backups, or a PC

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Move your content to a new Mac - Apple Support