DofL/Specialisation/functions of money 1.1.5

Advantages of DofL

• Increased productivity

• Decreased training costs

• Workers have jobs that are suited for them + their skill sets

• Increased efficiency because jobs are suited to workers

List some disadvantages of DofL

• Reduces occupational mobility of labour (risk of structural unemployment)

• Over-reliance on workers - production line could break down

• Unrewarding + repetitive work could lead to decreased quality in products

What is the definition of DofL?

A form of specialisation where tasks are divided amongst workers

Advantages of specialisation + DoL in organising production

• Increased efficiency + productivity: allows workers to become more skilled in specific tasks

• Lower costs: reduced training time + waste contribute to cost savings

• Job satisfaction due to tailored skills

• Economies of scale: larger quantities of identical goods can be produced more efficiently

Disadvantages of specialisation + DoL in organising production

• Dependency + vulnerability: an economy heavily dependent on a single industry/export can be vulnerable to economic shocks

• Risk of structural unemployment (if demand falls for specialised skills)

• Monotony: workers may find tasks repetitive → leading to job dissatisfaction

What is the definition of specialisation?

The concentration of individuals, firms, or nations on producing a limited range of g+s

Advantages of specialisation in production of g+s for trade

• Comparative advantage: nations can focus on producing g+s where they have a comparative advantage, leading to higher efficiency

• Increased standard of living: trade allows access to a wider variety of g+s, enhancing overall living standards

• Resource efficiency (maximising use of resources for specialise good)

• Trade benefits with other countries

• Countries don’t have to produce everything they need themselves

Disadvantages of specialisation in production of g+s for trade

• Income inequality: specialisation may benefit certain industries/regions more than others→ leading to income inequality

• Vulnerability to external shocks: reliance on trade exposes nations to risks, e.g. changes in global d+s disruptions

What are the 4 main functions of money?

A medium of exchange

A store of value (you can save it)

A unit of account (you can count it)

A standard of deferred payment (we can owe it)

A medium of exchange..

Money is an asset widely acceptable as a medium of exchange - firms will accept money in return for g+s

A store of value..

An asset that holds value over time

A unit of account..

A nominal unit of measure used to value/cost products, assets, debts, incomes + spending

A standard of deferred payment..

The accepted way in each market to settle a debt

DofL + specialisation with reference to Adam Smith..

Pin factory analogy - If each worker specialised in a part of the pin production (DofL) - production increases