1.1.5 Specialisation and the division of labour

Question 1

Adam Smith

Answer 1

One of the founding fathers of modern economics. His most famous work was the Wealth of Nations (1776) - a study of the progress of nations where people act according to their own self-interest - which improves the public good. Smith’s discussion of the advantages of division of labour remains a potent idea.

Question 2

Alienation

Answer 2

A sociological term to describe the estrangement many workers feel from their work, which may reduce their motivation and productivity. It is sometimes argued that alienation is a result of the division of labour because workers are not involved with the satisfaction of producing a finished product, and do not feel part of a team.

Question 3

Division of labour

Answer 3

The specialization of labour in specific tasks, intended to increase productivity.

Question 4

Measure of value

Answer 4

A function of money where it can be used to judge the value of a good or service.

Question 5

Medium of exchange

Answer 5

Money is any asset that is widely acceptable as a medium of exchange when buying goods and services in markets. It facilitates transactions between buyer and seller.

Question 6

Method of deferred payment

Answer 6

A function of money that allows a system of making payments at a later date.

Question 7

Money

Answer 7

Money is defined best by what money does. Money - in its various forms - fulfils various key functions including a medium of exchange, a unit of account, a store of value and a standard of deferred payment.

Question 8

Specialisation

Answer 8

A method of production where a business or area focuses on the production of a limited scope of products or services to gain greater productive efficiency.

Question 9

Standard of deferred payment

Answer 9

A function of money - the accepted way, in a given market, to settle a debt.

Question 10

Store of value

Answer 10

A function of money in that it can be used to save and be exchanged at a later time.

Question 11

Unit of account

Answer 11

A function of money, a nominal unit of measure or currency used to value/cost products, assets (e.g. houses), debts, incomes and spending.

Question 12

How did Adam Smith develop ideas of specialisation and the division of labour?

Answer 12

He noted that a pin factory could not make more than 20 pins a day because it involved 18 different processes that a single worker had to do each. However, if labour was divided into different tasks and workers specialised in one task each, 48,000 pins could be produced in a day.

Question 13

What does specialisation improve?

Answer 13

Output per person so productivity is increased.

Question 14

What are the advantages of specialisation and the division of labour in organising production?

Answer 14

• Increased Productivity: Specialisation 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 15

What are the advantages of specialisation and the division of labour in trade?

Answer 15

• 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 16

What are the disadvantages of specialisation and the division of labour in organising production?

Answer 16

• 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. R
• isks of repetitive strain injuries at work because of repeated tasks. This adds to the burden facing a nation’s health service.

Question 17

What are the disadvantages of specialisation and the division of labour in trade?

Answer 17

• Countries may become over-dependent on one particular export and if this fails their economy may collapse. For example, many developing countries specialise in farming and if crops fail due to weather they will have no income. Areas such as Manchester suffered high unemployment as traditional areas of employment, like shipbuilding, became less important.
• Vulnerability to External Shocks: Reliance on trade exposes nations to risks, such as changes in global demand or supply disruptions.
• Income Inequality: Specialisation may benefit certain industries or regions more than others, leading to income inequality.