Specialisation

Question 1

Specialisation

Answer 1

When individuals, firms and countries specialised in the production of one product or task

Question 2

Why are economists interested in specialisation

Answer 2

It is the basis of trade and makes the problem of scarcity easier
- less competition for trade

Question 3

Product specialisation

Answer 3

when a firm or individual makes a certain good

Question 4

Process specialisation

Answer 4

When workers specialise in certain parts of the production process

Question 5

Types of specialisation

Answer 5

1. Individual = specialise in one certain job
2. Firm = specialise in making one certain product
3. Countries = specialise in one certain task

Question 6

Division of labour

Answer 6

The breaking down of the production process into separate individual tasks

Question 7

Benefits of division of labour

Answer 7

Time efficiency
- workers don’t have to switch between different parts of the production process

Better quality
- less workers required and so individuals are focused on what they are good at
- less likely to make mistakes

Repetition
- making a product over and over again meaning workers become more efficient
- output per person increases as they develop mastery

Question 8

Drawbacks of division of labour

Answer 8

• might get bored and unstimulated therefore less productive
• person cannot move on from their current job and step into another job
• therefore the production process will have to stop if one person cannot do their job

Question 9

Barter Economy

Answer 9

When trade one good with another good
- however depends on people’s perspective on the value of the good
- relies on a double coincidence response as must have what the other person wants

Question 10

Advantages of specialisation on individuals

Answer 10

High wages
- more output and higher profit as specialised workers add value to the firm and so earn higher wages
- marginal revenue product of labour increases if productivity increases

Satisfaction
- people specialise in what they enjoy and so will be more productive

Security
- improving occupational mobility
- secure job and reduces risk of unemployment
- opens up international opportunities

Question 11

Disadvantages of specialisation on individuals

Answer 11

Capital labour substitution
- if workers are working in a low skilled job they may be replaced by capital
- leads to long term unemployment and occupational immobility

Boredom
- maybe become dissatisfied with what they are doing
- less productive and so get a low salary

Demand may change
- if demand changes for what they specialize in they won’t be able to get another job

Question 12

Advantages of specialisation on firms

Answer 12

Total revenue increases
- increased productivity means more output per worker per hour
- if quality increases firms can increase prices

Decrease total costs
- workers are more productive so produce more output so less unit labor costs
- hire less workers so can pay less wages
- these workers are specialized so no need to provide training

Better quality
- workers develop mastery so make less mistakes
- higher quality goods so charge higher and attract more customers

Question 13

Disadvantages of specialisation on firms

Answer 13

Demand may change
- the firms become obsolete as can’t make any other good as they only specialize in the production of one good
- more common now due to constant changes in trends

Overrealiant on specific workers
- if someone is not available the production process would have to stop as there would be no one else to cover them
- less output produced

Demand higher wages
- may want more than what they are producing
- they know that they are specialized workers and cannot be replaced
- total cost increases so revenue decreases

Question 14

What does the impacts of specialisation depend upon?

Answer 14

• depends on in which country selling goods
• depends on what firms are producing such as necessities
• depends on if specializing in the short or long term
• depends on if selling overseas and domestically so demand is an impacted by a single economy

Question 15

Advantages of an economy becoming more specialized upon the problem of scarcity

Answer 15

Greater output produced
- output per worker per hour increased and so able to satisfy needs and wants
- standards of living improves
- reduces the problem of scarcity as less needs and wants to fufil
- more efficient use of resources and dont deplete resources as quickly

Better quality
- attracts loyal customers which meets needs and wants

Exports
- can receive needs and wants from trading from other countries abroad
- gov can earn more tax revenue and can invest in welfare

Question 16

Disadvantages of an economy becoming more specialized upon the problem of scarcity

Answer 16

Dependants
- people are living longer and having more children so are becoming more dependant on resources

Sustainability
- depends upon what the country is specialising in

Productivity Decreases
- doing the same thing repetitively may become tedious and so productivity decreases
- workers may become complacent and so less efficient so less output is produced meaning less needs and wants are being met

Labour Immobility
- if in a low skilled industry, workers don’t have transferable skills and so if they are replaced by capital, they won’t be able to find another job
- benefits increase if people are unemployed and so there is opportunity cost for the government as can’t spend on other things

PPF curve shifts inwards
- productive capacity falls as the quality and quantity of FOP decreases
- if they operate inside the PPF, they are productively inefficient and so not addressing the problem of scarcity