Specialisation And Division Of Labour Flashcards
Specialisation and the division of labour:reference to Adam Smith
Adam Smith was a key economist during the 1700s and was best known for his book, the wealth of nations. Specialisation occurs when a country/business decides to focus on making a particular good/service. The division of labour occurs when the production process of a Good is broken down in to various small tasks. Adam Smith argued that through specialisation and the division of labour production could be increased and extra wealth could be created. This is due to the fact that specialisation results in an increase in productivity due to repetition and the incorporation of automation in the production process as well as less time spent switching between tasks. The example that Adam Smith used was of a pin factory where one worker may make the head, another may make the bottom and then another worker assembles the pin. Smith also argued for specialisation on a larger scale so that each country specialised in certain goods/services, he argued this would result in higher incomes and standards of living.
Advantages of specialisation and the division of labour in organising production
-Increased output-As a result of repetitive nature of specialisation it means workers develop greater skill in performing their particular task. Therefore workers produce more goods in same amount of time when specialisation and division of labour take place.
-Less wastage-As workers become more skilled at their particular task they make less mistakes as well as time this increasing efficiency and reducing wastage.
-Lower unit costs- The economies of scale gained from the increased output cause unit costs to decrease. For example as output increases it may mean that the business can buy in bulk and therefore gain greater discounts.
Disadvantages of specialisation and the division of labour in organising production
-Boredom- Autonomy of the process can result in boredom amongst workers. May result in workers being less productive. Furthermore, in the case of Henry Fords Model T production line it meant that workers had to be paid more as compensation for the monotony of their work.
Advantages of specialising in the production of goods and services to trade
-Greater output- As a result of countries specialising in certain goods/service output increases. Due to focusing on certain goods/services it allows businesses to become better at producing them and therefore they’re able to produce greater quantities. This will cause unit costs to decrease thus increasing consumer surplus and the prices of goods/services decrease.
-Greater variety-By different countries specialising in different goods it allows for greater variety within the goods. For example, a country may specialise in the production of hoovers. Although the good being specialised in is hoovers, there will be a greater range of different types of hoovers thus giving customers more choice within particular goods.
-Economic growth- Specialisation also allows greater quantities of goods to be produced and therefore increased trade. Countries can benefit from this, especially if their export revenue is greater than import expenditure. This is because trade is one of the components of AD (exports-imports) and therefore can lead to economic growth.
Disadvantages of specialising in the production of goods and services to trade
-Structural employment- by specialising in a certain G/S it increases the risk for certain countries. Due to the fact that if another country become better at producing a certain G/S than the domestic county it will result in a decline in sales in the domestic country. This is due to changes in comparative advantage. This can result in de-industrialisation as the domestic country can no longer compete with other countries. Domestic workers have narrow skill set as specialised, can’t find employment in other sectors. Unemployment and reduction in productive potential of country.
Over reliance-specialisation can cause countries to become over reliant on their trading partners. Eg one country may sell vegetables to domestic country as they are best in area. However if there is a draught in that area it will affect ability to produce vegetables, supply of vegetable la reduce in domestic country. This problem could be reduced if countries did not specialise meaning the domestic country could buy vegetables from a range of different countries.
Changing tastes/fashions-it may be difficult for countries to specialise in goods that are prone to changes in tastes and fashion. May find it difficult to adapt if overspecialised.
-Finite resources- a country may specialise in certain goods that need the same resources. This may lead to finite resources depleting which can cause problems in the country in long term. By producing lots of different goods it is more likely different resources will be consumed at slower rate.
Functions of money
-medium of exchange:can be used to buy and sell goods and services and is acceptable everywhere.
-measure of value:it can compare the value of two goods, also able to put a value on labour.
-a store of value: able to keep its value and can be kept for a long time, with barter goods such as fruit went out of date and therefore couldn’t keep value.
-a method for deferred payment: money can allow for debts to be created. People can therefore pay for things without having money in the present, and can pay for it later. This relies on money storing its value.
