Specialisation, division of labour and exchange Flashcards
What are the benefits of specialisation and division of labour?
1)Increased Productivity: Workers become more skilled and efficient at their specific tasks,
leading to higher output.
2)Cost Reduction: Specialisation allows for economies of scale, reducing average costs.
3)Enhanced Quality: Focused expertise often results in higher-quality products.
Example: In a car manufacturing plant, one worker installs engines, another fits doors, and another applies paint, each becoming highly skilled in their specific task.
Why does specialisation necessitate an efficient means of exchanging goods and services, such as the use of money as a medium of exchange?
1)Problem with Barter: In a barter system, finding a mutual coincidence of wants is challenging, making direct exchange inefficient.
1) Medium of Exchange: Money facilitates transactions by providing a common medium accepted by all parties.
2) Store of Value: Money retains value over time, allowing for deferred consumption.
3) Unit of Account: Money provides a standard measure of value, simplifying price comparisons.
Example: A baker can sell bread for money and then use that money to purchase a computer from a specialist producer, overcoming the limitations of barter. Rather than trading bread up to a computer…
What are the advantages and disadvantages of specialisation and division of labour?
Advantages:
1) Increased Efficiency: Specialisation leads to faster and more efficient production processes.
2) Skill Development: Workers become experts in their specific tasks, enhancing overall productivity.
Disadvantages: 1) Monotony: Repetitive tasks can lead to worker dissatisfaction and reduced motivation. 2) Vulnerability: Over-reliance on specific tasks or industries can lead to economic instability if demand shifts.
Example: While a factory worker may become highly efficient at assembling a single component, they might find the repetitive nature of the task monotonous, leading to potential burnout.
How does the introduction of money as a medium of exchange facilitate the benefits of specialisation?
1) Specialisation Leads to: Increased production efficiency and a focus on specific tasks.
2) Resulting Problem: Barter becomes inefficient due to the need for a double coincidence of wants.
3) Solution: The introduction of money as a medium of exchange facilitates transactions, allowing for deferred consumption and simplifying price comparisons.
Example: A farmer specialising in wheat production can sell wheat for money and use that money to purchase tools from a specialist producer, streamlining the exchange process.
