1.1.5 +1.1.6 Specialisation and Division of labour, types of economies

Question 1

what is specialisation?

Answer 1

when an individual, firm, region, country concentrates on the production of a limited range of goods and services

Question 2

what are the advantages of specialisation?

Answer 2

• increased quality and quantity
• more efficent use of resources
• higher output–> higher economic growth–> higher living standards
  *

Question 3

what is the division of labour?

Answer 3

the specialisation of workers on specific tasks in the production process

production process broken into many seperate tasks

Question 4

what are the disadvantages of specialisation?

Answer 4

• over reliance on industies which could be risky (if they collapse)
• ** reduced self sufficency ** due to increased interdependance
• natural resource depletion

over specialisation

Question 5

why is output increased with division of labour?

Answer 5

a task is divided up into sections, workers can complete their tasks accuratley in less time

Question 6

what are some of the advatnages of divion by labour?

Answer 6

• increased output per person (repetion of a task)
• lower supply costs per unit(gain in labour productivity)
• workers become more skilled through repetition (learning by doing)
• workers are easier and chaeper to train
• time is saved by workers focussing on a narrow range of tasks

Question 7

what are the disadvantages of division of labour?

Answer 7

• unrewarding- repetive work, lowring motivation and productivity
• workers take less pride in work- quality may suffer
• increased employee turnover –
• unemployment risks for workers (strucutural)

Question 8

what is the benefit of division of labour to firms and workers?

Answer 8

firms: greater quantity and quality of output
workers: higher skill levels potentially higher wages

Question 9

what is productivity?

equation

Question 10

what does increased productivity lead to?

Answer 10

• higher output and higher quality
• higher standard of living
• more efficent use of resources

Question 11

what is productivity- definition?

Answer 11

the effectivness of producitive effort, measured in terms of the rate of output per unit of input

Question 12

what are the two methods of trading?

Answer 12

• bartering (negotiating a price/haglling)
• money

Question 13

what are the 4 functions of money?

Answer 13

• medium of exchange: comonly accepted in exchange for gods and services
• measure of value: the price reveals a good’s value
• store of value: value is miantained and can be kept for a long time
• method of deffered payment: allows debt to be created (mortage)

Question 14

what did Adam Smith have to say about divsion of labour?

Answer 14

• it increased output
• incraese in productiity came from workers being able to just focus on one task, but could lead to bordom

studied effects ina pin factory

Question 15

What are the three different types of economies ?

Question 16

Describe free market economies

Answer 16

• resources are allocated by markets using the price mechanism
• no goverment intervention (taxes, subsisdisation, regulations)

Question 17

Describe command market economies

Answer 17

• all resources are alloctaed soley by the state

Question 18

Describe what a mixed economy looks like

Answer 18

• resources are allocated using the price mechanism and the goveremnt (healthcare & transport )
• public and private sector

Question 19

what is the public sector?

Answer 19

part of an economy which is owned or controlled by the goverment

Question 20

what is the private sector?

Answer 20

the part of an economy which is owned or controlled by individuals or groups of people, who seek to maximise profit or raise awareness

firms

Question 21

what were smiths views on economies?

Answer 21

• supported free markets
• thought that the price mechanism was very efficent at allocating resources
• goverments should leave markets alone, only act in market failure

Question 22

what is Marx’s view on economines?

Answer 22

• against free markets as it leads to capitalism, where workers are exploited, and inequality increases
• idea: command economy, goverment could divide resources freely

Question 23

what were Hayek’s view of economies?

Answer 23

• having a command economy is unrealistic for one goverment to collect all information
• whereas a free economy works well with price mechanism as a good communication network

prevents people starving due to goverment underestimation

Question 24

describe the price mechanism

Answer 24

• prices fall to eliminate excess supply
• prices rise to eliminate excess demand
• comminication network

Question 25

what are the pros and cons of a free market economies?

Answer 25

pros: * increased compettion in frims, cuttin costs, improve efficency,** lowers prices** * price mechansim is super effcient * more choices cons: * inequality * monopolies * market failures

Question 26

what are monopolies?

Answer 26

* when a firm owns 25% or more of the market share * therfeore they can exploit their consumers (higher prices and lower quality) * limiting choices in free markets and mixed economies

Question 27

what is a market failure?

Answer 27

* public goods are underprovided * externalities are not internalised (smoking) * information gaps can mislead the public (not eating enough vegables) | inefficent allocation of resources

Question 28

why is there wider choice in a free market for consumers?

Answer 28

firms have **profit motive** this means that in order to keep up with competition, firms develop new products and must meet consumer demand.... leading to more choice

Question 29

why are quality and innovation high in mixed and free market economies?

Answer 29

* **competition** * **profit motive**

Question 30

what are the pros and cons of command economies

Answer 30

pros: * correct market failure * less inequality * stops monopoly abuse cons: * goverment failure * destroy incentives (workers slack off and become less productive, entreprenurs innovate less because no profit incentive) * slow economic growth and little * limited choice

Question 31

define barter

Answer 31

the practice of exchanging one good or service for another without using money

Question 32

define specialisation

Answer 32

when an individual, firm, region or country concentrates on the production of a limited range of goods and services

Question 33

deine division of labour

Answer 33

the specialisation of workers on specific tasks in the production process

Question 34

Define medium of exchange

Answer 34

something which i s commonly accepted in exchange for goods and services | 1 of the functions of money

Question 35

define measure of value

Answer 35

the price of a good revealing it's value

Question 36

define store of value

Answer 36

value is maintained and can be kept for a long time

Question 37

define method of deffered payment

Answer 37

allows debt to be created

Question 38

define command economy

Answer 38

an economy in which resoucres are allocated solely by the state

Question 39

define a mixed economy

Answer 39

an economy in which resoucres are alloctaed by the publi and private sector

Question 40

define a free market economy

Answer 40

an economy in which resources are alloctaed soley by the price mechansim

Question 41

define the private sector

Answer 41

the part of economy owned or controlled by individuals or groups of individuals who seek to maximise profit or raise awarness

Question 42

define efficency

Answer 42

the optimal production and distribution of scarce resources

Question 43

what is goverment failure?

Answer 43

* unintended consequences such as black maket and smuggling * hard to set the size of subsidy,

Question 44

what is the role of the state in a mixed economy?

Answer 44

* allocates resources through planning * redistributes incomes through welfare spending * regulates consumers and firms

Question 45

what is the state?

Answer 45

consists of: * territory * citezens * goverments | is permenat unlike the goverment- rules over a stae at a given time

Question 46

why are free market and mixed economies less equal?

Answer 46

owners of land and capital accumulate wealth over time and pass this privillage on to their children through property, private education and social networks