Chapter 3 Division of Labour Flashcards
Division of labour
The breaking down of the production process by workers specialising in 1 or 2 tasks
Specialisation
When production is just focussed on 1 or 2 goods.
Advantages of specialisation
1) World output increases when individuals, regions or countries specialise in what they are relatively best are producing. ( Countries can trade surplus production cuz they r that gd at producin their gd = lower prices)
2) Can lead to economies of scale being better exploited.
Economies of scale
As output rises long-run average cost of production falls.
Disadvantages of specialisation
1) Just specialising on 1 or 2 goods can leave country over-dependent on other countries for selling good services to them. (Specialised economy unlikey to be self-suffiecient in times of crisis).
2) Can lead to large economic decline if there are production problems with that industry. (Fall in incomes of millions of ppl who rely on earnings of specialised product).
Advantages of the division of labour(4)
1) Workers have great familiarity with tasks so make less mistakes , which leads the better consistency and less parts rejected n therefore fewer resources wasted.
2) Workers can be allocated to roles in line with their strengths and taken off roles they r weak in.
3) Length of time to train workers falls cause theyre only trained on half a task so training costs go down = profits increase.
4) With greater familiarity worker becmes more quicker n skilled (efficient) so labour productivity increases.
Disadvantages of division of labour(4)
1) Due to boredom from doin 1 task repeatedly there is more chance of high labour turnover than previously =hiring costs + training costs increase.
2) Tasks become monotous n borin so workers lose interest n morale declines = more mistakes n fall in quality n productivity.
3) Workers only develop narrow range of skills which can cause long-run structural UE if demand for product falls.
4) Each stage of production becomes inter-dependent so if a worker bcmes ill, strikes, leaves no other worker may have skills disrupting followin stages of production.
4 functions of money
1) Store of value - Asset can be used now or in future. Allows ppl 2 save now n fund for future spending.
2) Unit of account - Can be compared in a clear understandable way (measure of value).
3) Method of the deferred payment - simplifies the value of debt (i.e person borrows £ today and can pay back loan in the future in way acceptable to the person who offered it).
4) Medium of exchange - Avoids need for barter system (which relies on doubke coincidence of wants) - money is accepted as a form of payment.
Also allows DoL as can specialise in 1 good and convert it into £.
Labour productivity
Value of output power worker per hour.
Structural unemployment
Inability of labour to take job in diff profession due to lack of transferable skills.
Double coincidence of wants
Where two parties each have a good or service the other party wants
Formula for labour productivity
Total output (units or value)
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Number of workers employed
