Specialisation Flashcards
What is specialisation
When we concentrate on a product or tax
What are the possible gains from specialisation
Higher output
Variety
A bigger market
What is the division of labour
Where production is broken down into many separate tasks
Who explain the division of labour
Adam Smith
Classical economist
Benefit of division of labour
Realised the output per person
Main limitations of the division of labour
- repetitive work
- people may move to less boring jobs
- suffer structural employment (only know how to do one job)
- mass produced standardised goods lack variety for consumers
Who first introduced comparative advantage
David Ricardo
1817
What is comparative advantage
When the costs of production is lower for a certain country + specialisation
When does absolute advantage occur
When a country or region can create more of a product with the same factor inputs
When does comparative advantage occur
When a country has lower opportunity cost
