Booklet 4 (Division of labour)

Division of labour

Breaking a large task into smaller, specialized jobs and assigning each job to different workers.

Division of labour disadvantages

Absenteeism

quality suffering due to boredom

Division of labour advantages

production quantity increasing

Efficiency

Specialisation

concentrating on a singular product or task

used often when describing a countrys particular output

Specialisation advantages:

Higher output

More variety

larger market

lower prices

Specialisation disadvantages

over dependence

vulnerability to global shocks

over exploitation of resources

Function of money

Medium of exchange

store of value

Unit of account (allows things to be compared in value)

Standard of deferred payment (loans)

Forward markets

A customized contract between two parties to buy or sell and asset at a specified date in the future.

forward market benefits:

Reduces uncertainty and risk for businesses.

Helps in budgeting and financial planning.

Beneficial in volatile markets (e.g oil, currencies)

forward market downsides

No flexibility: contract must be honored even if market prices move favorably.

Risk: risk that the other party defaults on the contract.