1.1.5 specialisation and the division of labour

Question 1

Specialisation and the division of labour: reference to Adam Smith

Answer 1

Specialisation is the production of a limited range of goods by a company/individual/country which means that trade is essential as it is the only way they are able to access all that they need

The division of labour is when labour becomes specialised in a particular part of the production process

if a country wants to maximise the amount of goods and services it can produce they need to ensure that all factors of production, including workers, undertake the tasks that they are best at

Adam Smith stated the concept of specialisation and the division of labour and showed how it can ​increase labour productivity ​(output per worker per hour), allowing firms to increase efficiency and lower their costs of production

Question 2

The advantages and disadvantages of specialisation and the division of labour in organising production

Answer 2

Advantages
- The division of labour enables ​labour productivity to be increased​. Workers will be
quicker, better and more efficient as they are concentrating on one thing and so can quickly develop their skills. It also is likely they will have natural abilities or talents in their task.

• This may also lead to a ​higher quality of goods and services, ​since workers are more skilled at their jobs.
• It is more cost effective to ​develop specialist tools​, improving speed or quality.
• Time is not wasted​ moving between jobs and getting out tools etc.
• Workers only need to be ​trained to do one specific task​, rather than many, saving
  time and money.

Disadvantages
- If someone is only doing one specific task, it can make work very boring which will lead to ​poor quality of work and people leaving the business. Firms can take some action to reduce this, for example by playing music.

• There is a ​reduction of craftsmanship and a much more standardised product because of mechanisation.
• If for some reason production in one process is delayed, every other task has to stop until that problem is solved.
• The workforce do not have wide industrial training and could therefore suffer from structural unemployment​.

Question 3

The advantages and disadvantages of specialising in the production of goods and services to trade

Answer 3

Advantages
- The theory of ​comparative advantage states countries should specialise in
producing those goods where they have a lower opportunity cost, and so they are relatively best at producing. This will help them boost their economy. On the whole, there is ​greater output​ globally

Disadvantages
- Countries may become ​over-dependent on one particular export and if this fails their
economy may collapse.

• Other countries specialise in non-renewable resources and these could run out​, which will result in a huge loss of income for that country. It will also mean the loss of these resources.
• There will be ​high interdependence and this will cause problems if trade is prevented, for example because of war.
• Some say that increased specialisation means there will be more competition to cut costs and therefore ​wages will fall​, but this is not necessarily true

Question 4

what are The functions of money

Answer 4

• A medium of exchange: It can be used to buy and sell goods and services and is acceptable everywhere. The problem with barter was that people could only trade if there was a double coincidence of wants: where both parties want the good the other party offers. Since money can be used to buy all goods and services, everyone will accept money as they know they can use it to buy what they want.
• A measure of value: It can compare the value of two goods, such as a table and a skirt. It is also able to put a value on labour.
• A store of value: It is able to keep its value and can be kept for a long time. With barter, goods such as fruits often went out of date and so could not keep their value.
• A method for deferred payment: Money can allow for debts to be created. People can therefore pay for things without having money in the present, and can pay for it later. This relies on money storing its value.