Unit 1.6

• Specialisation is the idea that countries should focus on producing a specific good, as overtime they will get better at producing it and have a competitive advantage when selling it.
• Adam smith created the idea about specialisation and division of labour
• Division of labour is when the production process in a firm is split into different stages and each employee specialises at a specific stage.This increases productivity because they get better at the job and can produce more efficiently
• Comparative Advantage is producing a cheaper good compared to other businesses
• Competitive advantage is a businesses ability to differentiate themselves from another. e.g usp
• Productivity is output per worker over a given period of time
• Production is a set of processes converting input into output
• Exchange rates can appreciate or depreciate.

  Appreciate is when the pound is strong

  Depreciate is when the pound is weak
• Division of labour

  ADV

  • reduces cost in training
  • quality is improved
  • business is productively efficient

  DIS

  • increase staff turnover
  • Loss of flexibility
  • Business is vulnerable
• Specialisation

  ADV

  • Increase output + better quality
  • competitive advantage
  • increased production

  DIS

  • Country becomes dependent on other countries
  • Likely to collapse if elsewhere can do it better
  • Variety decreases consumers
• Exchange rates is the value of one currency compared to another
• The model T Ford was the first to use Adam Smith's idea of division of labour
• Medium of exchange is the link between two parties when buying or selling
• 4 core functions of money

  1. Medium of exchange
  2. A store of value
  3. Unit of account
  4. standard of deferred payments
• Money is anything that is accepted as a medium of exchange for goods and services

  1. Commodity Money
  2. Fiat money
• Fiat money is declared as the legal type of money.e.g notes and coins
• Commodity money is products used to exchange goods and services like gold and silver
• The disadvantage of barter is that some goods and services are worth more than others.So its unfair