2.1 Specialisation And Trade Flashcards

1
Q

What is specialisation

A

Specialisation occurs when each worker competed a specific task in a production process

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2
Q

How can firms benefit from specialisation

A

Through the division of labour, worker productivity can increase. Firms can then take advantage of increased efficiency and lower average costs of production

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3
Q

How does specialisation help the problem of scarcity

A

Each worker specialises and output increases. This can help address the problem of scarcity, since resources are used more efficiently

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4
Q

Advantages of specialisation

A

Higher output and potential higher quality

Greater variety of goods and services produced

More opportunities for economies of scale, so the size of the market increases

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5
Q

Disadvantages of specialisation

A

Work becomes repetitive which could lower motivation potentially affecting quality and productivity

More structural unemployment since skills might not be transferable

Variety could in fact decrease for consumers

Higher worker turnover for firms

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6
Q

How can specialisation affect the production of goods and services to trade

A

Countries can specialise in the production of certain goods.

Countries can exploit their comparative advantage in a good, which means they can produce a good at lower opportunity cost to another

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7
Q

What is absolute advantage

A

This occurs when a country can produce more of a good with the same factor inputs

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8
Q

Advantages of specialisation to trade

A

Greater world output, so a gain in economic welfare

Lower average costs as markets become more competitive

Increased supply of goods to choose from

Outward shift in the PPF curve

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9
Q

Disadvantages of specialisation to trade

A

Less developed countries might use non-renewable energy too quickly and run out

Countries could be too dependent of the export of one commodity and if the price of that commodity fell, then the economy would suffer

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10
Q

What is a medium of exchange

A

Without money, goods and services were traded with other goods and services so people did not always get what the wanted of needed

Exchange could only take place if there was a double coincidence of wants

Using money eliminates this problem

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11
Q

What is a measure of value (unit of account)

A

Money provides a means to measure the relative values of different goods and services.

It also puts a value on labour

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12
Q

What is a store of value

A

Money has to hold its value to be used for payment. It can be kept a long time without expiring

However, quantity of goods and services that can be bought fluctuate with the forces of supply and demand

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13
Q

What is a method of deferred payment

A

Money can allow for debts to be created

People can pay for things without having money present

This relies on money storing its value

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