Specialisation and the Division of Labour (1.1.5) Flashcards
What does Labour Productivity mean?
Output per worker
What theories did Adam Smith come up with?
Based on observations made during a visit to a pin factory, he developed the ideas of specialisation and the division of labour
What does Adam Smiths theory suggest?
(Pin Theory-Specialisation)
He noted that a single worker could not make more than 20 pins a day as it involved around 18 different processes, such as cutting the wire, sharpening the end, stamping the head etc. However, if the labour was divided up into different tasks and workers specialised in just that one task, Adam Smith estimated that just 10 workers could produce 48,000 pins per day.
What is Division of Labour?
The division of labour is when a task is broken up into several component tasks. When employees are split up into different, smaller parts.
What is specialisation?
Division of Labour allows workers to specialise by focusing on one (or a few) of the components that make up the production process and thereby gain significant skill in doing it.
What does division and specialisation of labour result in?
This results in higher output per worker over a measured time period and so increases productivity
What are the Advantages of Specialisation and division of labour?
-Increases Job expertise
-Increased Productivity
-Capital used more intensively
-Lower Unit Costs
-Increased Profits
-Higher wages and so morale
-Creates many low skilled jobs
What are the Disadvantages of Specialisation and the Division of Labour?
-Repetition Lowers Morale
-Poorer manufacturing quality due to decrease in motivation
-Potentially higher labour turnover
-Mass produced products not specialised to consumer preferences. Lack variation
Explain the law of diminishing marginal returns
When one factor of production is fixed (Capital) increasing a variable factor of production (labour) will increase output up to a point, before output starts to decrease
Example of diminishing marginal return:
E.g. Adding more workers to a manufacturing line in a factory will eventually make it less efficient as they could get in each others ways
What is specialisation and Trade?
Many major producers who specialise find that they need bigger markets to achieve their full production potential. So they may need to find trading partners to create enough demand for their goods and services that are left over.
What are the Advantages of Specialisation and Trade?
-Can lead to more output/efficiency of workers
-Access to more goods and services (Variety)
-Increases productivity
-Greater output for firms
-Lower unit costs
-Economic growth
-Higher income
What are the Disadvantages of Specialisation and Trade?
-Low morale/boredom of workers
-less output if high staff turnover
-Creates interpendency
-Reliance for necessities
-Loss of UK industries
-Structural unemployment
-Overdependency on other countries resources
Identify why firms specialise and trade
UK firms utilise specialisation and the division of labour to maximise their productivity. This creates a large volume of output
Large output will be sold domestically in the UK, but firms will have leftover stock (surplus). Surplus will be sold overseas.
UK firms will specialise in certain good and services for overseas trade. Overseas firms will specialise in certain goods and services for overseas trade.
This will create an interdependency between UK and overseas and so increases risk of external shocks
However, specialisation and division of labour may not be possible without international trade.
Identify the four functions of money
-Medium of exchange: Transactions between buyer and seller
-Unit account: used to measure value and cost of production and assets
-Standard of deferred payment: way to settle debt
-Store of value: To buy future good and services
