1.1.5 specialisation and the division of labour

What is specialisation?

When an individual, firm, region or country concentrates on the production of a limited range of goods and services

What is specialisation within a business?

A workers are in specialist role e.g manager

What is devision of labour? What does it involve?

Process of splitting the production process into a number of individual operations and making each operation the special task of 1 worker. It involves workers specialising.

What did Adam Smith argued?

Breaking the production process into specialised tasks would raise total output more than having each worker complete a full procedure alone

What are advantages of specialisation in organising production?

Increases productivity —> more skilled workers. Larger quantities of identical goods can be produced more efficiently. Reduce training time and waste, contribute to cost savings.

What are disadvantages of specialisation in organising production?

Repetitive task—> job dissatisfaction. Dependancy—> economic shock→ loose job→ can’t do anything else.

What are advantages of specialising in the production of goods and services for trade?

Nations can focus on producing goods and services where they can have a comparative advantage→ higher efficiency. Trade allows access to a wider variety of goods and services increasing living standards.

What are disadvantages of specialising for trade?

Specialisation may benefit certain industries or regions more than others, leading to income inequality

What is money?

Is anything that is acceptable for the payment for a good, service or debt

What are 4 functions of money?

• medium of exchange- enables the buying and selling of products and eliminates the need for barter

• Measure of value- enables comparison between products and their values so that they can be bought and sold easily

• Store of value- a convenient way of storing wealth so that it can be spent later. It is good as it holds its value in the short term (unless the inflation rate is very high)

• Method of deferred payment- enables borrowing and lending

What needs to be happening for specialisation to be used?

Medium of exchange so that trade can be successful

What is productivity?

Labour productivity→ measure of output from a worker in a given time period

What does higher labour productivity means?

There is higher output per worker per hour

What does productivity lowers?

Average unit cost

Why does productivity lowers?

• people become proficient at repetitive task

• Lower supply cost/ unit for business

• Lower price for consumers → increase economic welfare