Chapter 2 - specialisation and exchange

Question 1

What is individual production?

Answer 1

Where one individual does all the work needed to complete a product. For example, a craftsman producing furniture or pottery.

Question 2

What is the main disadvantage with individual production?

Answer 2

It is often a very slow process.

Question 3

What is specialised production?

Answer 3

Where each worker specialises in one particular task so that every worker contributes to the final product.

Question 4

How can the factors of production be used more productively?

Answer 4

If they specialise in one or only a small number of tasks.

Question 5

What can specialisation be by?

Answer 5

1. Individuals - people doing one occupation or task in the production process.
2. Firms - producers making one or a few goods and services (eg. Air NZ).
3. Regions - parts of a country providing particular goods and services (eg. Queenstown).
4. Countries - countries specialise in certain goods and services (eg. New Zealand).

Question 6

What do people need in order to specialise?

Answer 6

People need to be able to exchange their output.

Question 7

What did the earliest humans do instead of exchanging their output?

Answer 7

They were self-sufficient. This means that they had to produce all of their own needs and wants.

Question 8

What is the division of labour?

Answer 8

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.

Question 9

What is another name for the division of labour?

Answer 9

Job splitting.

Question 10

What are the advantages of the division of labour?

Answer 10

1. More goods and services can be produced as each worker becomes more skilled and quicker by specialising.
2. People can concentrate on what they are best at and what interests them.
3. Less time and money is lost during training as one task is usually simpler to master than many.

Question 11

What are the disadvantages of the division of labour?

Answer 11

1. Doing one repetitive task may become boring and mistakes may be made.
2. There may be a loss of job satisfaction as workers feel unimportant as they no longer make a complete product.
3. Workers rely on each other, the are interdependent, if one worker slows down, everyone slows down.
4. Products are all the same as opposed to being personalised.

Question 12

What is money?

Answer 12

Money is anything generally accepted in exchange for goods and services. It is a medium of exchange.

Question 13

What are the disadvantages of barter?

Answer 13

1. It is usually time consuming.
2. There has to be a double coincidence of wants (where both people want each other’s goods or services.
3. It can be difficult to agree on the value of the goods or services being swapped.

Question 14

What are the functions of money?

Answer 14

1. Money is a medium of exchange.
2. Money is a measure of value.
3. Money is a store of value.
4. Money is a means of deferred payment.

Question 15

What is meant by money being a medium of exchange?

Answer 15

Money can be used to buy goods and services, this is also called a means of exchange.

Question 16

What is meant by money being a measure of value?

Answer 16

Money can be used to value goods and services, it can also be used to compare the value of goods and services.

Question 17

What is meant by money being a store of value?

Answer 17

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.

Question 18

What is meant by money being a means of deferred payment?

Answer 18

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.

Question 19

What are the characteristics of good money?

Answer 19

1. Portable - money should be easy to carry around.
2. Divisible - money should have a number of different units so change can be given.
3. Durable - money should last a long time.
4. Recognisable - people should be able to recognise money.
5. Acceptable - people should be prepared to take it in exchange.
6. Scarce - money should be limited in supply so that it has value.

Question 20

What does it mean by notes and coins only having intrinsic value?

Answer 20

They are not valuable themselves.

Question 21

What is the money supply?

Answer 21

The notes and coins in circulation plus the deposits in back accounts.

Question 22

What might make notes and coins obsolete?

Answer 22

Electronic funds transfer.

Question 23

What are coins used for?

Answer 23

Everyday smaller transactions, therefore they need to be durable.

Question 24

What are notes and cheques used for?

Answer 24

Large payments and for paying bills, therefore they need to be portable.

Question 25

What is the main benefit with specialised production?

Answer 25

It usually speeds up the production process.