4.1.4.2 Specialisation, division of labour and exchange Flashcards
What is specialisation?
Specialisation occurs when individuals, businesses, or countries focus on producing a specific good or service in which they are most efficient.
What is the division of labour?
Division of labour is the process of splitting production into specific tasks, with each worker specializing in one task to increase efficiency.
Who introduced the concept of division of labour?
Adam Smith introduced the concept of division of labour in his book The Wealth of Nations, using the example of pin production.
What are the advantages of specialisation and division of labour?
Advantages include:
Higher output and potentially higher quality.
Greater variety of goods and services.
Economies of scale and larger markets.
Increased competition, leading to lower prices.
What are the disadvantages of specialisation and division of labour?
Disadvantages include:
Repetitive work, leading to lower worker motivation.
Structural unemployment due to non-transferable skills.
Reduced variety for consumers.
Higher worker turnover due to job dissatisfaction.
How does specialisation increase productivity?
Specialisation allows workers to focus on tasks they are best at, improving efficiency and increasing output per worker.
What is an example of specialisation in production?
In pin production, dividing tasks (e.g., cutting wire, sharpening pins) among workers increases output significantly, as described by Adam Smith.
What is comparative advantage?
Comparative advantage occurs when a country can produce a good at a lower opportunity cost than another country.
What is absolute advantage?
Absolute advantage occurs when a country can produce more of a good with the same resources compared to another country.
What are the advantages of countries specialising in production?
Advantages include:
Greater world output and economic welfare.
Lower average costs due to competition.
Increased variety of goods.
Outward shift in the production possibility frontier (PPF).
What are the disadvantages of countries specialising in production?
Disadvantages include:
Overuse of non-renewable resources.
Over-dependence on one commodity, making the economy vulnerable to price or supply shocks.
Why is money necessary for specialisation?
Money facilitates the exchange of goods and services, eliminating the inefficiencies of barter and enabling specialisation.
What are the functions of money?
The functions of money are:
Medium of exchange: Facilitates transactions.
Measure of value (unit of account): Measures the value of goods and services.
Store of value: Holds value over time.
Method of deferred payment: Allows for debts and future payments.
What is a medium of exchange?
A medium of exchange is a function of money that allows goods and services to be traded without the need for barter.
What is a measure of value (unit of account)?
A measure of value is a function of money that allows the relative values of goods and services to be compared.
What is a store of value?
A store of value is a function of money that allows it to hold its value over time, enabling savings and future purchases.
What is a method of deferred payment?
A method of deferred payment is a function of money that allows debts to be created and paid in the future.
What is the problem with barter systems?
Barter systems require a double coincidence of wants, meaning both parties must want what the other offers, making transactions inefficient.
How does specialisation lead to economies of scale?
Specialisation increases output, allowing firms to operate at a larger scale and reduce average costs through economies of scale.
What is an example of a country specialising in production?
Norway specialises in oil production, becoming one of the world’s largest oil exporters.
How does specialisation affect the PPF?
Specialisation can lead to an outward shift in the PPF, as resources are used more efficiently, increasing productive potential.
What is the relationship between specialisation and trade?
Specialisation encourages trade, as countries produce goods they are efficient at and trade for goods they cannot produce.
How does specialisation impact worker satisfaction?
Specialisation can lead to repetitive work, reducing worker satisfaction and potentially increasing turnover rates.
What is the role of competition in specialisation?
Specialisation increases competition, incentivising firms to lower costs and improve efficiency, which benefits consumers through lower prices.
