1.1.5 Specialisation And The Division Of Labour Flashcards
What is specialisation?
The production of a limited range of goods by a company/individual/country
This means that trade is essential as it is the only way they are able to access all that they need
What is the division of labour?
When labour becomes specialised in a particular part of the production process
What should a country do 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
Outline Adam Smith
He stated the concept of specialisation and division of labour and showed how it can increase labour productivity (allowing firms to increase efficiency and lower their costs of production)
What is the pin making process (Adam Smith)
- he went to a factory 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
What are the advantages of specialisation and division of labour in organising production?
- division of labour enables labour productivity to be increased (workers will be more efficient as they are concentrating on one thing and can quickly develop their skills. Its also likely that they will have natural abilities or talents in their task)
- higher quality if goods and services since workers are more skilled at their jobs
- more cost effective to develop specialist tools, improving speed or quality
- time is not wasted moving between jobs and getting out tools
- workers only need to be trained to do one specific task, rather than many, saving time and money
What are the disadvantages of specialisation and division of labour in organising production?
- doing one specific task all the time can make work boring and therefore lead to poor quality of work and people leaving the business
- reduction of craftsmanship and a much more standardised product due to mechanisation
- if 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 employment
Why is it essential that countries which specialise should trade
In order to obtain all the goods and services that consumers demand
What are the advantages of trade?
Greater output globally:
- 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
What are the disadvantages of trade?
- countries may become over-dependent on one particular export (is 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
- high interdependence and this will cause problems if trade is prevented (for example because of war)
- increased specialisation means there will be more competition to cut costs and therefore wages will fall (not necessarily true)
What are the functions of money?
- a medium of exchange
- a measure of value
- a store of value
- a method for deferred payment
A medium if exchange
- money can be used to buy and sell goods and services and is acceptable everywhere
A measure of value
- money 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
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
