1.1.5 Specialisation and the Division of Labour

Specialization

The concentration of individuals, firms, or nations on producing a limited range of goods or services.

Division of Labor

A form of specialization where tasks are divided among workers.

Adam Smith

The father of economics who emphasized the benefits of specialization in his book "The Wealth of Nations" (1776).

Increased Productivity

The result of specialization, allowing workers to become more skilled in specific tasks, leading to higher efficiency.

Economies of Scale

The advantage of producing larger quantities of identical goods more efficiently.

Lower Costs

The reduction in training time and waste, contributing to cost savings.

Monotony

The potential downside of specialization, where workers may find repetitive tasks monotonous, leading to job dissatisfaction.

Dependency

The vulnerability of an economy heavily dependent on a single industry or export to economic shocks.

Comparative Advantage

The ability of nations to focus on producing goods and services where they have a comparative advantage, leading to higher efficiency.

Increased Standard of Living

The benefit of trade, allowing access to a wider variety of goods and services, enhancing overall living standards.

Vulnerability to External Shocks

The risk of reliance on trade, exposing nations to changes in global demand or supply disruptions.

Income Inequality

The potential consequence of specialization, where certain industries or regions benefit more than others, leading to income inequality.

Medium of Exchange

The function of money that facilitates the exchange of goods and services, eliminating the need for barter.

Measure of Value

The function of money as a unit of account, providing a common measure of the value of goods and services.

Store of Value

The function of money that allows it to be saved or stored for future use, preserving its value over time.

Method of Deferred Payment

The function of money that enables transactions where payment occurs at a later date.