1.1.5- Specilisation and divison of labour

Question 1

Specialisation

Answer 1

Production of a limited range of goods by a company/individual/country.

Question 2

Define division of labour

Answer 2

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

Question 3

Advantages of division of labour

Answer 3

1.) Worker training costs will lower as they only need to trained to do a specific task. This decreases cost of production for firms. This fall in cost can be transfer through lower prices. Low prices increases demand and increases consumer surplus.

2.) Leads to higher quality of goods and services, since workers are more skilled at their jobs. This increases demand for goods and services, which increases revenue and thus profitability for firms in the long term

3.) Consumers benefits with lower prices of goods produced where labour is devised. This is because with higher labour productivity, time savings and effective capital machinery going to the right workers, cost of production decreases for firms. As a result, firms may transfer the lower costs via lower prices, increasing consumer surplus and increasing demand for goods and services. Furthermore an increase in demand will lead to increased revenue and profit for firms in the long term. If there is more profit, workers can benefit from higher wages.

4.) With more production lines, there will be more time savings. This is because workers will be focussing on their specific part of the production process. As a consequence, productive efficiency for the business improves, reducing cost of production.

Question 4

Disadvantages of division of labour

Answer 4

1.) If production in one process is delayed, every other task has to stop until that problem is solved. This decreases labour productivity, thus increasing the cost to produce goods.

2.) Workers may get bored by repeatedly doing the same task. This results in mistakes creeping in or low motivation, which would result in low labour productivity, which increases the cost of production for firms. Furthermore, workers will want to leave their jobs, which would result in firms constantly hiring new workers. New workers would have lower human capital due to less training. Also, administration costs will rise to hire new workers, increasing cost of production. This would lead to a fall in revenue, thus profits. Consumers will also suffer from higher prices

3.) Workers may end up being long term unemployed if they lose their job. This is because having over specialised jobs with specific job skills will result in occupational immobility if they lose their job due to technology advances or another country gaining a cost advantage in the industry

As a consequence, structural unemployment will increase, with governments having to bear the costs through re - training programmes to increase employment.

Question 5

What did Adam Smith (economist) state about division of labour?

Answer 5

. Stated that the concept of specialisation and division of labour increased labour productivity and lower costs of production

. Used ‘pin factory’ example
He visited and observed a pin making process that was split in 18 different operations, which made the company produce 5,000 per pin

• Refer to ‘pin factory’

Question 6

Define structural unemployment

Answer 6

Unemployment causes by shifts in an economy .

It is when there is a mismatch of skills between the unemployed and available jobs

E.g. Deindustrialisation causes structural employment

Question 7

Name the three sectors of the economy

Answer 7

. Primary Sector
. Secondary / Manufacturing Sector
. Tertiary / Service Sector

Question 8

Name the two sectors of the economy

Answer 8

. Public Sector
. Private Sector

Question 9

Explain Primary Sector

Answer 9

Exploiting and extracting of raw materials and natural resources

E.g. Agriculture, mining, forestry, fishing

Question 10

Explain Secondary Sector

Answer 10

Involves construction and manufacturing of goods

E.g. food manufacturing, sewing, building companies

Question 11

Explain Tertiary Sector

Answer 11

Involves producing services

E.g. transport, sport and leisure, education, health

Question 12

Explain Public Sector

Answer 12

Government sector of the economy

E.g. school, healthcare, military

Question 13

Explain Private Sector

Answer 13

Part of sector owned by private individuals, companies and charities

E.g. private school, private healthcare

Question 14

Define productivity

Answer 14

Output per unit of input employed

Question 15

Define labour productivity

Answer 15

Output per worker

Question 16

Define capital productivity

Answer 16

Output per unit of capital employed

Question 17

Define market

Answer 17

Where buyers and sellers meet

Question 18

Define and give example of submarket

Answer 18

a market within a larger market

e.g. the market for diesel fuel in the UK is a sub - market of the market for all oil-based fuels in the UK.

Additionally the market for all oil-based fuels in England (national market) is a submarket of the international market for oil based fuels

Question 19

Define marketplace

Answer 19

a convenient set of arrangements by which buyers and sellers communicate to exchange goods and services

Question 20

Examples of marketplace

Answer 20

. Over the telephone
. Online
. Mail order
. Newspapers and magazines
. Industrial estates

Question 21

Define national market

Answer 21

Trade within a country.

Also called domestic market

Question 22

Define international market

Answer 22

Trade involving two or more countries

Question 23

Advantages of Specialisation

Answer 23

1. ) Improvement in Quality ⁠— This is because workers and firms, through performing the same task numerous time become so good that the quality of the final product increases. Workers take pride in their work, showing in final product quality leading to an increase in sales and total revenue
2. ) Increase in allocative efficiency ⁠—This is because resources are being allocated where they are best suited and thus used efficiently rather than being wasted producing goods / services where expertise or resources is lacking

3.) An increase in output - This is because firms and workers concentrate on producing what they are good at. This allows for more goods / services to be produced enabling more consumption take place in the economy

4.) Better use of labour which increase productivity - Since workers become very good at producing goods and services, increasing the output produced in a given time period. This reduces the costs of production of firms and could lead to higher wages for staff

Question 24

Disadvantages of Specialisation

Answer 24

1. ) The problem of finite resources — Resources required in production may run out, where firms and countries rely on specialisation would suffer from lost revenue and lost economic growth.
2. ) Changes in fashion / Taste — If a firm specialises in a good or service that is reliant on fashionable demand, the firm or country will suffer due to lost revenue and lost economic growth if the fashion changes. This is a risk about specialisation, therefore it is arguably better to DIVERSIFY a firm so they produce multiple types of goods and services
3. ) De - Industrialisation — if through specialisation, another country or firm is able to produce the same good / service at lower cost, the other country or firm has a cost advantage. Industries in the initial country would decline and it would less to mass unemployment
4. ) National Interdependence — trade is a fundamental part of specialisation working effectively, however if there is conflict between countries, this could threaten the benefits of specialisation through reduce exports of goods. Imports of goods to produce this good or service will also be reduce. This may result in unemployment, increased cost of production, fall in GDP