1.1.5 Specialisation and the Division of Labour

• Define Specialisation

  -Specialisation refers to the concentration of individuals, firms, or nations on producing a limited range of goods or services

  -They trade the surplus with others
• Define the division of labour

  The division of labour is a form of specialisation where tasks are divided among workers.
• How does Adam Smith relate to Specialisation and the Division of Labour?

  - He emphasised the benefits of specialisation in his book "The Wealth of Nations" (1776)

  
  

  -He argued that specialisation leads to increased productivity and economic growth
• What are the advantages of specialisation and the division of labour in Organising Production?

  - Increased Productivity: Specialisation allows workers to become more skilled in specific tasks, leading to higher efficiency

  
  

  -Economies of Scale: Larger quantities of identical goods can be produced more efficiently

  
  

  -Lower Costs: Reduced training time and waste contribute to cost savings
• What are the disadvantages of specialisation and the division of labour in Organising Production?

  -Monotony: Workers may find repetitive tasks monotonous, leading to job dissatisfaction

  
  

  -Dependency: An economy heavily dependent on a single industry or export can be vulnerable to economic shocks

  
  

  -If one sector of the process slows down, all other sectors will slow down or may not work
• What are the advantages of Specialising in the Production of Goods and Services for Trade?

  -Comparative Advantage: Nations can focus on producing goods and services where they have a comparative advantage, leading to higher efficiency

  
  

  -Increased Standard of Living: Trade allows access to a wider variety of goods and services, enhancing overall living standards
• What are the disadvantages of Specialising in the Production of Goods and Services for Trade?

  -Vulnerability to External Shocks: Reliance on trade exposes nations to risks, such as changes in global demand or supply disruptions

  
  

  -Income Inequality: Specialization may benefit certain industries or regions more than others, leading to income inequality
• What are the functions of money? (1)

  -Medium of Exchange

  Money facilitates the exchange of goods and services, eliminating the need for barter

  
  

  Example: You can use money to buy groceries without needing to trade goods directly

  
  

  -Measure of Value

  Money serves as a unit of account, providing a common measure of the value of goods and services

  
  

  Example: Prices are expressed in a monetary unit, making it easier to compare the value of different items
• What are the functions of money? (2)

  -Store of Value

  Money can be saved or stored for future use, preserving its value over time

  
  

  Example: You can save money in a bank account to use for future expenses

  
  

  -Method of Deferred Payment

  Money allows for transactions where payment occurs at a later date

  
  

  Example: Credit purchases enable consumers to buy now and pay later using money as a medium of exchange