2.1 Specialisation and trade

Question 1

What is meant by specialisation and the division of labour?

Answer 1

Specialisation is the process of focusing on a specific task or area of production, while the division of labour is the breakdown of a larger task into smaller, specialized tasks that can be performed by different workers

Question 2

How do specialisation and the division help to address the basic economic problem?

Answer 2

Increasing production, creating extra wealth and taking advantage of economies of scale.

Question 3

What is a barter system?

Answer 3

The act of trading goods between two or ore parties without using money.

Question 4

What is meant by “double coincidence of wants”?

Answer 4

two people have goods they are both happy to swap in exchange. i.e. a perfect barter exchange.

Question 5

What are the various roles of money?

Answer 5

1. Medium of exchange
2. Measure of value
3. Store of value
4. Standard of deferred payment.

Question 6

Why is money acting as a medium of exchange so important in an economy?

Answer 6

It is universally accepted, enabling equal market participation.

Question 7

What is productivity in economics, and why is it so important?

Answer 7

Productivity is the efficiency of production of goods or services expressed by some measure.
It impacts the standard of living, allows people to get what they want faster and more efficently.