Adam Smith

Question 1

In which way does the division of labour lead to additional
production? (2 marks)

Answer 1

Increases skill and dexterity

Saves time lost transporting goods from one station to another.

Question 2

What are the benefits of the surplus? (2 marks)

Answer 2

Increases wealth because surplus goods can be traded for other products and services.

Due to increase in dexterity, work is more efficient so reduction in cost of goods.

Question 3

How can people get what they want alternatively and why doesn’t this allows work? (3 marks)

Answer 3

Asking a friend for a product or service.

You would need a friend for each product and service you need which isn’t feasible.

Issue of time; Each friend cant give you the product/ service at the exact time you need it.

Question 4

What is Smith’s view of differences in talents between different people?

Answer 4

Difference in talent stems from the effects of division of labour.

Question 5

Explain how a society that develops according to Smith’s theory becomes strongly
Interdependent.

Answer 5

Specialized business focus on producing specific goods. This pushes them to trade with other businesses for the products and services that they want.

Question 6

Why does the extent of the market limit the division of labour?

Answer 6

The size of the market determines its demand. If the market is small it discourages people from specializing in that particular market.