1.1.5 - Specialisation and the division of labour Flashcards
What is specialisation ?
Specialisation occurs when an individual, a firm, a region or a country concentrates on the production of a limited range of goods and services.
What is division of labour ?
When a firm splits up their production process into smaller tasks, and assigns different workers to each of these tasks. = Increase in productivity
What is average costs ?
Average cost refers to the per-unit cost of production.
What is Labour productivity ?
Labour productivity measures the output per worker in a period of time.If productivity rises, firms can produce more with the same number of workers.
Blurt everything you know about Adam Smith.
● Adam Smith stated the concept of specialisation and the division of labour and
showed how it can increase labour productivity (output per worker), allowing firms
to increase efficiency and lower their costs of production.
● He visited a pin factory in glasgow and observed that the pin making process had been split into 18 different operations. As a result, the company were able to produce 5,000 pins per person employed. If the work had been carried out by workers making the whole pin from start to finish, it would have been less a few dozen.
Blurt all the Advantages and Disadvantages of specialisation (in terms of production) ?
Pros :
- Increases output
- Improves quality
-Decreased average cost
- Increased productivity
Cons :
- Repetitive = demotivation
- Increased worker turnover rate
- Workers will have a lack of range of skills
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Tip : Think of the workers in china and why shein is so cheap.
Blurt all the Advantages and Disadvantages of specialisation (in terms of trade) ?
Pros
- Increased output for the country
Cons
- Countries can over-specialise and deplete their natural resources e.g. Saudi Arabia is slowly running out of its oil reserves
What is the first function of money ?
● 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.
What is the second function of money ?
● 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.
What is the third function of money ?
● 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.
What is the fourth function of money ?
● 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.
Comparative advantage
Comparative advantage is an economy’s ability to produce a particular good or service at a lower opportunity cost than its trading partners.
Blurt everything you know about comparative advantage vs absolute advantage
