2.1 Specialization and Trade Flashcards
What is the division of labour?
Division of labour involves dividing the workforce and allocating specific individuals to specific tasks. It allows labour to specialise in a task.
What is Specialisation?
Where a business, area or economy focuses on the production of a limited scope of products or services to gain greater degrees of productive efficiency within an overall system.
What does specialisation enable firms to take advantage of?
Allows firms to take advantage of economies of scale. So as production increases, average unit cost decreases.
What are the disadvantages of specialisation?
Specialised firms are often not flexible. Workers may struggle to adapt and do a new role quickly if the environment changes. This is because they are only trained in their specialised skill. Workers may become bored. This could reduce productivity if they start to do their work more slowly. countries may be less self-sufficient and struggle when trade suffers (More interdependent)
What are the advantages of specialisation?
It can lead to economies of scale. It reduces the cost of training workers because they only have to be trained for a particular job. It can also lead to an increase in labour productivity. Workers do tasks they’re good at and so should produce better quality and/or a higher quantity of products.
What is comparative advantage?
A country’s ability to produce a good or service relatively more efficiently (i.e at a lower opportunity cost) than another country.
What is absolute advantage?
A country’s ability to produce a good or service using less resources than another country.
What are the advantages of specialisation on a global scale?
Greater world output, so there is a gain in economic welfare.
Lower average costs, since the market becomes more competitive. There is an increased supply of goods to choose from.
There is an outward shift in the PPF curve.
What are the disadvantages of specialisation on a global scale?
Less developed countries might use up their non-renewable resources too quickly, so they might run out.
Countries could become over-dependent on the export of one commodity, such as wheat. If there are poor weather conditions, or the price falls, then the economy would suffer.
What are the 4 functions of money?
Medium of exchange
Unit of account
Means of deferred payment
Store of value
How can money be used as a medium of exchange?
Money can be used in exchange for goods and services (eliminating the need for a double coincidence of wants/barter).
How can money be used as a unit of account?
Money can be used to provide a measure of the value of a good or service.
How can money be used as a mean of deferred payment?
Money can allow for debts to be created. People can therefore pay for things without having money in the present, and can pay for it later. This relies on money storing its value.
How can money be used as a store of value?
Money has to hold its value to be used for payment. It can be kept for a long time without expiring.
What is the double coincidence of wants?
Where both parties in a transaction want the good or service that the other is providing.
