Specialisation

Question 1

Specialisation leads to a Division of Labour

Answer 1

1. People could make all the things they need and want themselves. They could grow their own food, make their own clothes, build their own computers, and so on. In practice though, unlikely to work. People and firms tend to specialise - some grow food, others make clothes etc.
2. The division of labour is a type of specialisation where production is split into different tasks and specific ppl are allocated to each task, e.g. in making a stool - one person could make the legs and another could make the seats.
3. Adam Smith explained the increase in productivity that could be achieved through the division of labour. He said that one untrained worker wouldn’t even make 20 pins a day, but 10 trained workers, specialising in different tasks, could make 48000.
4. There are advantages and disadvantages to specialisation, but overall an economy can produce more stuff if ppl and firms specialise.

Question 2

Advantages and Disadvantages of Specialisation

Answer 2

Advantages of specialisation:

1. Ppl can specialise in the thing they’re best at
2. This can lead to better quality and higher quantity of products for the same amount of effort overall - i.e. increased labour productivity.
3. Specialisation is one way in which firms can achieve economies of scale e.g. a production line is a form of specialisation
4. Specialisation leads to more efficient production - this helps to tackle the problem of scarcity, because if resources are used more efficiently, more output can be produced per unit of input.
5. Training costs are reduced if workers are only trained to perform certain limited tasks.

Disadvantages of specialisation:

1. Workers can end up doing repetitive tasks, which can lead to boredom
2. Countries can become less self-sufficient - this can be a problem if trade is disrupted for whatever reason. E.g. if a country specialises in manufacturing, and imports all its fuel, then that country could be in trouble if it falls out with its fuel supplier.
3. It can => a lack of flexibility - e.g. if the companies eventually move elsewhere, the workforce left behind can struggle to adapt.

Question 3

Trade means people can Buy the stuff they’re no longer making Themselves

Answer 3

1. Specialisation means that trade becomes absolutely vital - economies have to be abnle to obtain things they’re no longer making for themselves. This means it’s necessary to have a way of exchanging goods and services between countries.
2. Swapping goods with other countries is one way a country can get what it needs, e.g. a country which mines diamonds may want oil, while another country which produces oil may want diamonds. This way of trading goods is called a barter system - it’s very inefficient because it takes a lot of time and effort to find traders to barter with.
3. The most efficient way of exchanging goods and services between countries is using money. Money is a medium of exchange - it’s something both buyers and sellers value and that means that countries can buy goods, even if sellers don’t want the things the buying country is selling.`

Question 4

Money has three other functions too:

Answer 4

1. A measure of value - e.g. the value given to a good can be measured in US dollars.
2. A store of value - e.g. an individual who recieves a wage may wait before buying something if they know that the money they have will be of similar value in the future.
3. A standard of deferred payment - money can be paid at a later date for something that’s consumed now, e.g. people often borrow money to buy a car or pay university fees.