4.1.4.2 Specialisation, division of labour and exchange

Question 1

What is specialisation?

Answer 1

Where we concentrate on one product or task

Question 2

What is an example of regional specialisation in the UK?

Answer 2

Cornwall specialises in tourism whereas London specialises in financial services

Question 3

What is specialisation by individuals called?

Answer 3

The division of labour

Question 4

What example of the division of labour was used by Adam Smith?

Answer 4

Workers in a pin factory

Question 5

How did Adam Smith predict that productivity would change when workers were specialised to one task in a pin factory?

Answer 5

One worker might be able to make 20 pins a day if he were to complete all the processes himself but 10 workers together specialising in a variety of tasks could, he estimated, make 48000 pins

Question 6

division of labour

Answer 6

where workers specialise in a job but split their work in the production line to create an increased output

Question 7

What is the main idea behind specialisation?

Answer 7

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

Question 8

What are the advantages of specialisation?

Answer 8

• Higher output.
• Possible higher quality as production focuses on what workers are best at.
• Possible greater variety of products made.
• More opportunities for economies of scale, so the size of the market increases.
• More competition, which incentivises firms to lower costs to also keep prices low.
• production becomes cheaper
• improves skills

Question 9

What are the disadvantages of specialisation?

Answer 9

• Repetitive work, so lower workers’ motivation which can affect quality and productivity.
• Structural unemployment as skills may not be transferable.
• Possible that a greater variety may not happen due to focus on one type of good.
• Higher worker turnover for firms (workers dissatisifed and leave the firm).

Question 10

What are the problems with the system of barter?

Answer 10

Store of wealth
Require mutual wants
Hard to determine prices
Indivisibility

Question 11

why does specialisation require trade

Answer 11

Specialisation and trade mean that countries that produce no oil can consume oil products and countries with large reserves of raw materials can export them in exchange for other goods that they need. This helps reduce the problem of scarcity in individual countries and enables countries PPF to shift outwards.

Question 12

what are the problems of specialisation in trade?

Answer 12

poor countries may be encouraged to use up their non renewable resources to sell to developing countries, therefore in the long term we could run out of non renewable resources.

Question 13

Barter

Answer 13

Swapping one good for another without the use of money

Question 14

4 functions of money

Answer 14

medium of exchange (generally accepted method of payment)

measure of value (compare value of 2 goods)

store of value

method of deferred payment

Question 15

Alienation

Answer 15

A sociological term to describe the estrangement many workers feel from their work, which may reduce their motivation and productivity. It is sometimes argued that alienation is a result of the division of labour because workers are not involved with the satisfaction of producing a finished product, and do not feel part of a team.

Question 16

Measure of value is a function of what ?

Answer 16

A function of money where it can be used to judge the value of a good or service.

Question 17

Medium of exchange

Answer 17

Money is an asset that is widely acceptable as a medium of exchange when buying goods and services in markets. It facilitates transactions between buyer and seller.

Question 18

Method of deferred payment

Answer 18

A function of money that allows a system of making payments at a later date.

Question 19

Store of value

Answer 19

A function of money in that it can be used to save and be exchanged at a later time.