2.1 Specialisation and trade

Question 1

What is a market?

Answer 1

A set of arrangements that allows transactions to take place/where or when buyers and sellers meet

Question 2

What are the four functions of price and what do they mean?

Answer 2

1. Allocation: allocating scarce resources among competing uses
2. Rationing: ration scarce resources when market demand outstrips supply (more demand than supply), when there’s a shortage of a product price will rise
3. Signalling: prices adjust to demonstrate wheree resources are and aren’t required
4. Incentive: when the price of a product rises, quantity supplied rises

Question 3

What’s the division of labour?

Answer 3

The separation of the tasks in an organisation. The production process is broken down into seperate tasks

Question 4

Advantages of the division of labour

Answer 4

+ Increased productivity
+ Workers become more skilled
+ Faster and more consistent production

Question 5

Disadvantages of division of labour

Answer 5

• Workers become bored as work becomes repetitive
• High worker turnover (many workers leave the company)
• Creates a lack of responsibility among workers

Question 6

What’s specialisation?

Answer 6

In a company, an individual decides to focus their labour on a specific type of production.

Question 7

Advantages of specialisation

Answer 7

+ An increase in competition acts as an incentive to minimise costs, keep prices down and therefore lower inflation
+ Higher output; total production of goods/services is riased, quality improved too

Question 8

Disadvantages of specialisation

Answer 8

• May cause scarcity issues; workers with a narrow range of skills may struggle to find employment if their skills aren’t required
• Workers may struggle to adapt to changes/do a new role quickly because they’re only trained in their specialised skill