5- Specialisation, Division of Labour and Money

Question 1

What is Specilisation?

Answer 1

It occurs when economic units such as individuals, firms, regions or countries concentrate on producing specific goods or services.

Question 2

What is division of labour?

Answer 2

It involves dividing the workforce and allocating specific individuals to specific tasks. It allows labour to specalise in a task.

Modern businesses divide up their workforce. If each person does one job alot, they are usually better at that one job.

Question 3

What is an economy of scale?

Answer 3

Specilisation through division of labour allows firms to take advantage of economies of scale. So as production increases, average unit cost decreases.

Question 4

Benefits of specilisation

Answer 4

• Economies of scale
• Higher productivity
• Higher quality products
• Reduces cost of training - they only have to be trained for their particular job
• Time (a scarce resource) is saved constantly changing tasks.

Question 5

Disadvantages of specilisation

Answer 5

• Specialised firms are often inflexible - lack of adaptability if environment changes
• Workers become bored- work slower
• Countries may be less self-efficient and suffer when trade suffers
• more absents

Question 6

What measures inflation?

Answer 6

CPI Index

Question 7

What is Production?

Answer 7

A measure of the value of the output of goods and services e.g measured by national GDP or an index of production in specific industry such as car manufacturing.

Question 8

What is Productivity?

Answer 8

• A measure of the efficiency of factors of production
• Measured by output per person employed
• Or by output per person per hour

Question 9

Relationship between Production and Productivity?

Answer 9

An increase in production doesn’t automatically mean an increase in productively it depends on how many factor inputs have been employed to supply extra output.

Question 10

Productivity equation

Answer 10

Output/ no. of workers

Question 11

What is the Public Sector?

Answer 11

State or government sector of the economy. Production of goods and services is achieved by organisations such as government department, local authorities or state owned businesses.

Question 12

What is the Private Sector?

Answer 12

Part of the economy owned by private individuals, companies and charities.

Question 13

What are sub markets?

Answer 13

Used to describe a market within a larger market.

Question 14

What is the Primary Sector of the economy?

Answer 14

Raw materials are extracted and food is grown e.g. agriculture, farming, mining

Question 15

What is the Secondary Sector of the economy?

Answer 15

Raw materials are transformed into goods e.g. motor manufacturing , food processing, steel production

Question 16

What is the Tertiary Sector of the economy?

Answer 16

Produces services e.g. transport, sport and leisure, financial services, education and health.

Question 17

What are the functions of money?

Answer 17

• Deferred payment
• Medium of exchange- between buyer and seller
• Store of value
• Unit of account
• A measure of value

Question 18

What is Deferred Payment?

Answer 18

Temporary postponement of the payment of an outstanding bill or debt, usually involving repayment by installments. If people lend in the economy, they think they can buy roughly the same amount of goods and services by when it is payed back.

Question 19

What is Barter?

Answer 19

Exchange involving swapping one good for another.

Question 20

What is problem with Barter?

Answer 20

It requires each party to the transaction to want what the other has to trade.

Question 21

Which economies is Barter normally associated with?

Answer 21

Economies where individuals or small groups are self reliant and the need for trade is small.

Question 22

What has money opposed to barter allowed economies to do?

Answer 22

Grow through specialisation

Question 23

Liquidity definition

Answer 23

The ease with which an asset can be converted into money without loss of value.

Question 24

What are Time Deposits?

Answer 24

The bank/building society pay higher rates of interest than current accounts. They are used for more saving and less for transactions than current accounts. Depositors need to give notice if they wish to withdraw money (hence the term ‘time’).

Question 25

Forms of money in a modern economy?

Answer 25

• Cash
• Money in current accounts
• Near monies

Question 26

Features of cash

Answer 26

• Means notes and coins
• Little intrinsic value unlike gold
• It’s issued by the government
• It must be accepted by law

Question 27

Is cash perfect money?

Answer 27

No-
it’s almost a perfect medium of exchange. But inflation affects its measure of value, store of value and method of deferred payment.

Question 28

Features of money in current accounts

Answer 28

• Bank and building societies in the UK offer customers current account facilities.
• They have 2 features:
  i) Cash can be withdrawn on demand from the account. So deposits can be converted into money.
  ii) Account holders are provided in a cheque book and debit card. They can be used to buy goods and services- therefore it’s a medium of exchange.

Question 29

Is money in current accounts perfect money?

Answer 29

No-
Some firms reject cheques and debit cards in transactions.
Little or no interest is offered on accounts and so current accounts lose value over time with inflation damaging their store of value.
- But deposits in current accounts are almost as good as a form of money as cash.

Question 30

Features of near monies

Answer 30

• They are assets which fulfill some but not all functions of money.
• They are measures of values and store of value but cannot be used as a medium of exchange. However they can be converted into medium of exchange quickly and a t little costs e.g time deposits.