opportunity costs/ Exchange and specialisation Flashcards
What is opportunity cost?
The next best alternative forgone
What are goods known as if they have no opportunity cost?
a Free good
What is an exchange?
the process by which goods and services are traded
What is specialisation?
the concentration by a worker/workers/whole economy on a narrow range of goods or services
What is voluntary exchange?
an exchange between two people where there is mutual benefit for both the groups involved.
What are transaction costs and how are they reduced?
Transaction costs are the costs involved in the exchange of G+s, and are reduced by markets. More organised markets mean lower transaction costs.
What is the division of labour?
dividing the production process into different stages, to enable workers to focus on specific tasks- increasing overall efficiency.
Definition of productivity
output per person per unit of time
Benefits of specialisation
- Increase in output
- wider range of products and services
- increased efficiency
- increased productivity
- improved quality
Negatives of specialisation
- highly specialised jobs become boring- leads to low labour morale
- less motivation/ concentration leads to more mistakes
- assembly lines fail if there is one disruption
Consequences of specialisation for developing countries?
Developing countries concentrate on producing primary products using low paid workers in labour intensive jobs.
