1.1.5 Specialisation and the Division of Labour

Question 1

What is “Specialisation”

Answer 1

Specialisation occurs when individuals, firms, regions, or countries focus on producing a narrow range of goods and services rather than everything they need. It allows for greater efficiency and productivity.

Question 2

What is the division of labour?

Answer 2

When labour becomes specialised in a particular part of a production process.

Question 3

What are the advantages of specialisation?

Who argued it?

Answer 3

• Labour productivity to be increased (output per worker).
• Higher quality of goods and services.
• More cost effective - time not wasted switching between jobs - workers only needed to be trained to do one specific task.

Adam Smith - argued that it increases labour productivity.

Question 4

What are the disadvantages of specialisation?

Answer 4

• Can be repetitive and boring leading to poor quality of work and people leaving the business.
• Reliance on the production of one good creates a massive vulnerability.
• Structural employment -> workforce not trained outside of their specific task.

Question 5

How does the theory of comparative advantage argue in favour of specialisation?

Answer 5

States that countries should specialise in producing those goods in which they have a lower opportunity cost and are relatively best at producing.

Question 6

What are the disadvantages of specialistion in terms of trade?

Answer 6

• Countries become over dependent on one particular export and if this fails thier economy may collapse.
• Dutch disease / reliance on non renewable resources.
• High interdependence on other countries, this could be disrupted easily.

Question 7

What are the 4 functions of money?

Answer 7

• Medium of exchange.
• Store of value.
• A measure of value.
• A method of deferred payment.