1.1.5 - specialisation and division of labour Flashcards
What is specialisation?
The production of a limited range of goods by a individuals, firms or nations which means trade is required because individuals produce only one good or service and exchange it to obtain others, ensuring a good standard of living
What is division of labour?
Production is broken down into many separate tasks which are divided up among the workers.
What are some advantages of specialisation?
Increased output per worker, lower cost per unit, lower prices for consumers, increased international trade.
What are some disadvantages of specialisation?
Falling productivity due to repetitive work, lack of variety, structural unemployment, overreliance on one work/task/factory, countries may become over dependent on one particular export (economy could collapse)
What is money?
Anything generally accepted in payment of a debt; removes the needs to barter (trading goods and services through swapping one good for another), avoiding double coincidence of wants
What has money allowed for?
- Reduces the cost of exchange/trade from bartering
- Encourages trade which allows for greater specialisation
What are the four functions of money?
Medium of exchange, store of value, unit of account, standard of deferred payment
What does the ’medium of exchange’ function mean?
Money is any asset widely acceptable as a medium of exchange, which facilitates transactions between a buyer and seller; specialisation/division of labour requires a means of exchanging goods and services
What does the ‘store of value’ function mean?
Asset that holds value over time, meaning it can be used now or in the future, allowing savings
What does the ‘unit of account’ function mean?
Allows the value of something to be expressed in an understandable way and value of items to be compared
What does the ‘standard of deferred payment’ function mean?
The accepted way, in each market, to settle a debt
