Chapter 2 - specialisation and exchange Flashcards
What is individual production?
Where one individual does all the work needed to complete a product. For example, a craftsman producing furniture or pottery.
What is the main disadvantage with individual production?
It is often a very slow process.
What is specialised production?
Where each worker specialises in one particular task so that every worker contributes to the final product.
How can the factors of production be used more productively?
If they specialise in one or only a small number of tasks.
What can specialisation be by?
- Individuals - people doing one occupation or task in the production process.
- Firms - producers making one or a few goods and services (eg. Air NZ).
- Regions - parts of a country providing particular goods and services (eg. Queenstown).
- Countries - countries specialise in certain goods and services (eg. New Zealand).
What do people need in order to specialise?
People need to be able to exchange their output.
What did the earliest humans do instead of exchanging their output?
They were self-sufficient. This means that they had to produce all of their own needs and wants.
What is the division of labour?
A production process can be split up into a number of smaller tasks. Each worker can then specialise in doing one or a few of these tasks. This is called the division of labour.
What is another name for the division of labour?
Job splitting.
What are the advantages of the division of labour?
- More goods and services can be produced as each worker becomes more skilled and quicker by specialising.
- People can concentrate on what they are best at and what interests them.
- Less time and money is lost during training as one task is usually simpler to master than many.
What are the disadvantages of the division of labour?
- Doing one repetitive task may become boring and mistakes may be made.
- There may be a loss of job satisfaction as workers feel unimportant as they no longer make a complete product.
- Workers rely on each other, the are interdependent, if one worker slows down, everyone slows down.
- Products are all the same as opposed to being personalised.
What is money?
Money is anything generally accepted in exchange for goods and services. It is a medium of exchange.
What are the disadvantages of barter?
- It is usually time consuming.
- There has to be a double coincidence of wants (where both people want each other’s goods or services.
- It can be difficult to agree on the value of the goods or services being swapped.
What are the functions of money?
- Money is a medium of exchange.
- Money is a measure of value.
- Money is a store of value.
- Money is a means of deferred payment.
What is meant by money being a medium of exchange?
Money can be used to buy goods and services, this is also called a means of exchange.
What is meant by money being a measure of value?
Money can be used to value goods and services, it can also be used to compare the value of goods and services.
What is meant by money being a store of value?
Money can be saved without losing value depending on the rate of inflation. If prices rise, money loses value or purchasing power, interest on savings can offset this.
What is meant by money being a means of deferred payment?
Money allows a person to buy on credit, they gain the use of goods and services and pay for them later. Interest can offset any inflation during the period which the money is being paid back.
What are the characteristics of good money?
- Portable - money should be easy to carry around.
- Divisible - money should have a number of different units so change can be given.
- Durable - money should last a long time.
- Recognisable - people should be able to recognise money.
- Acceptable - people should be prepared to take it in exchange.
- Scarce - money should be limited in supply so that it has value.
What does it mean by notes and coins only having intrinsic value?
They are not valuable themselves.
What is the money supply?
The notes and coins in circulation plus the deposits in back accounts.
What might make notes and coins obsolete?
Electronic funds transfer.
What are coins used for?
Everyday smaller transactions, therefore they need to be durable.
What are notes and cheques used for?
Large payments and for paying bills, therefore they need to be portable.
What is the main benefit with specialised production?
It usually speeds up the production process.
