4.1.4.2 - Specialisation, division of labour and exchange

Specialisation =

When a factor of production is devoted to a narrow range of tasks for which it is well-suited.

Division of Labour =

The action of splitting up a large and complex production process into separate tasks which are each given to a specialised worker.

Why is Specialisation Useful?

Workers given a narrow range of tasks suited to their skill set →

• Workers do the tasks that they are most productive in (no wasted time doing things they’re bad at)

• Workers get better / more productive at their job (as only practicing that one task)

• No time wasted switching between tasks

Why is an efficient means of exchanging g&s necessary for specialisation?

• When people specialise, they only do tasks they are good at.

• This makes them reliant on others for other things (e.g. a farmer needs a mechanic to fix their car)

• If there was not a medium of exchange, it would be a Barter Economy, which requires a double coincidence of wants.

• This would making exchanging goods & services very difficult.

• Therefore, need to use money as a medium of exchange.