1.1.7 Specialisation and the division of labour

Question 1

Specialisation

Answer 1

Where workers are assigned specific tasks within a production process.

Question 2

Examples of specialisation
[Global level]

Answer 2

Brazil with coffee

Question 3

Examples of specialisation
[National level]

Answer 3

Silicon Valley with technology

Question 4

Examples of specialisation
[Firm level]

Answer 4

Factory workers won’t work as salespeople

Question 5

Examples of specialisation
[Household level]

Answer 5

Father stays at home whilst mother works

Question 6

What was Adam Smith’s pin factory?

Answer 6

Adam Smith visited a pin factory. He said that one untrained worker wouldn’t even be able to make 20 pins per day, but 10 workers, specialising in different tasks, could make 48,000.

Question 7

How does specialisation increase productivity?

Answer 7

Where workers are assigned specific tasks within a production process.Concentration increases efficiency. Over time, if production is divided, each employee increases their productivity.

Question 8

What is productivity?

Answer 8

Output per worker

Question 9

When does specialisation work best?

Answer 9

Specialisation works best when mass producing a certain good.

Question 10

What happens to the price of good if specialisation is used in the production process?

Answer 10

The more people specialise, the cheaper the goods will be produced (as firms can benefit from economies of scale as average costs are low).

Question 11

Division of labour

Answer 11

A type of specialisation where production is split into different tasks and specific people are allocated to each task.

Question 12

Advantages of specialisation

Answer 12

• Better quality products
• Higher output of products
• More efficient production and increased productivity (if resources are used more efficiently, more output can be produced per unit of input.)
• Firm can achieve economies of scale
• Increased profit for firms, and therefore increased tax revenue for the government.
• Workers become particularly skilled in a particular task
• Better use of scarce resources.
• Training costs are reduced if workers are only trained to perform certain limited tasks.

Question 13

Disadvantages of specialisation

Answer 13

• Workers can end up doing repetitive tasks, which can lead to boredom.
• Severe knock-on effects if one part of production isn’t functioning (e.g. broken machine or human error).
• Potentially more automation.
• Countries can become less self-sufficient, which can be a major issue if trade is disrupted.
• Lack of flexibility – e.g. if the companies eventually more elsewhere, the workforce left behind can struggle to adapt.
• Fewer transferable jobs . – e.g. Miners in the UK could not find work after the mines closed.

Question 14

What does specialisation mean that countries have to do?

Answer 14

**Trade becomes vital **– economies have to be able to obtain the things they are not making for themselves. This means it is necessary to have a way of exchanging goods and services between countries.

Question 15

What is the most efficient way of exchanging goods and services?

Answer 15

Money

Question 16

What are the functions of money?

Answer 16

1) Medium of exchange (accepted as a payment for goods)
2) Measure of value (a good can be assigned a monetary value)
3) Store of value (money will hold a similar value)
4) Standard of deferred payment (money can be used to pay back debt)

Question 17

What is the most important function of money?

Answer 17

The medium of exchange - (it allows trade to happen).

Question 18

What is a barter economy?

Answer 18

An economy where goods are traded directly rather than through the medium of money.

Question 19

Why are bartering economies inefficient?

Answer 19

It takes a lot of time and effort to find traders to barter with.

It also involves a double coincidence of wants, meaning both parties want the good that the other party has.

Question 20

When has bartering been used in the past?

Answer 20

In the Stone Ages - when money wasn’t created.

When hyper inflation occured in the past (and the value of money became worthless). In these cases, people resort to bartering goods directly – as seen in Germany 1922-1923.

Question 21

Advantages of a barter economy

Answer 21

• It is a way to avoid transaction costs
• May be more emotionally satisfying to swap physical goods (e.g. football players)

Question 22

Limitations of a barter economy

Answer 22

• It becomes difficult to produced specialised goods only wanted by a small proportion of the population.
• Indivisibility of some goods/services – it is harder to swap a cow if it was worth 10,000 eggs.
• Season – e.g. a farmer who has most of their crop coming out in September may not be able to store it for later in the year.
• No way to store wealth
• Difficult to judge the true value of a good/service

Question 23

What are the types of money in a modern economy?

Answer 23

• Cash
• Money in current accounts
• Near monies (Money which can be converted into cash. E.g. assets such as houses)

Question 24

Key attributes of money

Answer 24

• Durable
• Divisible
• Consistent
• Convenient
• Generally accepted