1.1.5 +1.1.6 Specialisation and Division of labour, types of economies Flashcards
what is specialisation?
when an individual, firm, region, country concentrates on the production of a limited range of goods and services
what are the advantages of specialisation?
- increased quality and quantity
- more efficent use of resources
- higher output–> higher economic growth–> higher living standards
*
what is the division of labour?
the specialisation of workers on specific tasks in the production process
production process broken into many seperate tasks
what are the disadvantages of specialisation?
- over reliance on industies which could be risky (if they collapse)
- ** reduced self sufficency ** due to increased interdependance
- natural resource depletion
over specialisation
why is output increased with division of labour?
a task is divided up into sections, workers can complete their tasks accuratley in less time
what are some of the advatnages of divion by labour?
- 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
what are the disadvantages of division of labour?
- unrewarding- repetive work, lowring motivation and productivity
- workers take less pride in work- quality may suffer
- increased employee turnover –
- unemployment risks for workers (strucutural)
what is the benefit of division of labour to firms and workers?
firms: greater quantity and quality of output
workers: higher skill levels potentially higher wages
what is productivity?
equation
what does increased productivity lead to?
- higher output and higher quality
- higher standard of living
- more efficent use of resources
what is productivity- definition?
the effectivness of producitive effort, measured in terms of the rate of output per unit of input
what are the two methods of trading?
- bartering (negotiating a price/haglling)
- money
what are the 4 functions of money?
- 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)
what did Adam Smith have to say about divsion of labour?
- 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
What are the three different types of economies ?
Describe free market economies
- resources are allocated by markets using the price mechanism
- no goverment intervention (taxes, subsisdisation, regulations)
Describe command market economies
- all resources are alloctaed soley by the state
Describe what a mixed economy looks like
- resources are allocated using the price mechanism and the goveremnt (healthcare & transport )
- public and private sector
what is the public sector?
part of an economy which is owned or controlled by the goverment
what is the private sector?
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
what were smiths views on economies?
- supported free markets
- thought that the price mechanism was very efficent at allocating resources
- goverments should leave markets alone, only act in market failure
what is Marx’s view on economines?
- against free markets as it leads to capitalism, where workers are exploited, and inequality increases
- idea: command economy, goverment could divide resources freely
what were Hayek’s view of economies?
- 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
describe the price mechanism
- prices fall to eliminate excess supply
- prices rise to eliminate excess demand
- comminication network
what are the pros and cons of a free market economies?
pros:
* increased compettion in frims, cuttin costs, improve efficency,** lowers prices**
* price mechansim is super effcient
* more choices
cons:
* inequality
* monopolies
* market failures
what are monopolies?
- 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
what is a market failure?
- public goods are underprovided
- externalities are not internalised (smoking)
- information gaps can mislead the public (not eating enough vegables)
inefficent allocation of resources
why is there wider choice in a free market for consumers?
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
why are quality and innovation high in mixed and free market economies?
- competition
- profit motive
what are the pros and cons of command economies
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
define barter
the practice of exchanging one good or service for another without using money
define specialisation
when an individual, firm, region or country concentrates on the production of a limited range of goods and services
deine division of labour
the specialisation of workers on specific tasks in the production process
Define medium of exchange
something which i s commonly accepted in exchange for goods and services
1 of the functions of money
define measure of value
the price of a good revealing it’s value
define store of value
value is maintained and can be kept for a long time
define method of deffered payment
allows debt to be created
define command economy
an economy in which resoucres are allocated solely by the state
define a mixed economy
an economy in which resoucres are alloctaed by the publi and private sector
define a free market economy
an economy in which resources are alloctaed soley by the price mechansim
define the private sector
the part of economy owned or controlled by individuals or groups of individuals who seek to maximise profit or raise awarness
define efficency
the optimal production and distribution of scarce resources
what is goverment failure?
- unintended consequences such as black maket and smuggling
- hard to set the size of subsidy,
what is the role of the state in a mixed economy?
- allocates resources through planning
- redistributes incomes through welfare spending
- regulates consumers and firms
what is the state?
consists of:
* territory
* citezens
* goverments
is permenat unlike the goverment- rules over a stae at a given time
why are free market and mixed economies less equal?
owners of land and capital accumulate wealth over time and pass this privillage on to their children through property, private education and social networks
