1.1.5 Specialisation and the division of labour

Question 1

Specialization

Answer 1

the concentration of individuals, firms, or nations on producing a limited range of goods or services.

Question 2

Division of labor

Answer 2

a form of specialization where tasks are divided among workers.

Question 3

Adam Smith’s

Answer 3

Adam Smith, the father of economics, emphasized the benefits of specialization in his book “The Wealth of Nations” (1776).
He argued that specialization leads to increased productivity and economic growth.

Question 4

Advantages of Specialization

Answer 4

Increased Productivity: Specialization allows workers to become more skilled in specific tasks, leading to higher efficiency.
Economies of Scale: Larger quantities of identical goods can be produced more efficiently.
Lower Costs: Reduced training time and waste contribute to cost savings.

Question 5

Disadvantages of Specialization

Answer 5

Monotony: Workers may find repetitive tasks monotonous, leading to job dissatisfaction.
Dependency: An economy heavily dependent on a single industry or export can be vulnerable to economic shocks.

Question 6

Advantages of Specializing for Trade

Answer 6

Comparative Advantage: Nations can focus on producing goods and services where they have a comparative advantage, leading to higher efficiency.
Increased Standard of Living: Trade allows access to a wider variety of goods and services, enhancing overall living standards.

Question 7

Disadvantages of Specializing for Trade

Answer 7

Vulnerability to External Shocks: Reliance on trade exposes nations to risks, such as changes in global demand or supply disruptions.
Income Inequality: Specialization may benefit certain industries or regions more than others, leading to income inequality.

Question 8

Medium of Exchange

Answer 8

Money facilitates the exchange of goods and services, eliminating the need for barter.
Example: You can use money to buy groceries without needing to trade goods directly.

Question 9

Measure of Value

Answer 9

Money serves as a unit of account, providing a common measure of the value of goods and services.
Example: Prices are expressed in a monetary unit, making it easier to compare the value of different items.

Question 10

Store of Value

Answer 10

Money can be saved or stored for future use, preserving its value over time.
Example: You can save money in a bank account to use for future expenses.

Question 11

Method of Deferred Payment

Answer 11

Money allows for transactions where payment occurs at a later date.
Example: Credit purchases enable consumers to buy now and pay later using money as a medium of exchange.