Topic 2.1 - Specialisation And Trade Flashcards
What is a market?
Set of arrangements that allows transactions to take place, where buyers and sellers meet
What is the division of labour?
If workers specialise in a task, production process can be broken down into a series of separate processes/tasks
Results in higher productivity in terms of items produced
Real world examples - vehicle assembly, construction, fast food
What is specialisation?
Concentration by a worker/group of people, firms, regions or whole economy on a narrow range of goods and services
For it to be effective trade must take place
Happens within extended families, businesses, organisations and a country or region in country
Advantages of division of labour?
- higher productivity and efficiency - more output per hour
- lower unit costs (average) leading to higher profits
- encourages investment in specific capital - economies of scale
Disadvantages of division of labour?
- risk of worker alienation (boredom, demotivation)
- risk of disruptions in production process
- risks of structural unemployment due to occupational immobilities
- lack of variety
What is the barter system?
System of exchange by which goods and services are directly exchanged for other goods or services without a medium of exchange such as money
In order for it to work you need double coincidence of wants
What is the function of money?
Must be acceptable to both parties (currency)
Acts as a store of value (can be used for future transactions)
Be a unit of account (value of things can be compared)
Be a standard of differed payment (settle a debt)
Advantages of specialisation for a country?
Can make use of full economic resources
Increases scale of production
Extra surprise;us can be exported, injection into circular flow
Disadvantages of specialisation in a country?
World prices for product may fall, declining revenue
Risk of over specialising and structural unemployment
May lead to over extraction of natural resources
Demotivation and boredom within workers
