specialisation, division of labour and exchange

• specialisation 


  production of a limited range of goods by an individual, firm, or country
• what can specialisation do?

  increase efficiency

  as works to strengths and resources available
• what is division of labour?

  splitting up the production process so that workers perform one task (the one they do best)
• what can division of labour cause?

  more productivity

  however possibility of lack of motivation- boredom
• productivity

  output per unit of input employed

  arises from labour productivity and capital productivity
• labour productivity

  output per worker
• capital productivity

  output per unit of capital employed
• primary goods are

  raw materials - such as coal and wood
• secondary goods are

  manufacturing goods- such as cars
• tertiary goods are

  selling goods- such as textiles

  (the most profitable)
• specialisation advantages


  • higher output - more trade, more growth
  • greater allocative efficiency
  • higher productivity- better use of workers
  • quality improvement
• specialisation disadvantages


  • finite resources
  • changes in fashion/taste
  • de-industrialisation
  • national independence (relies on trade)
• division of labour advantages

  • workers highly producti’ve
  • specialist capital for workers
  • lower prices, higher quality - for consumers
• division of labour disadvantages

  • demotivates workers
  • high worker turn over
  • risk of long term unemployment
  • highly standardised goods/services
• system of exchange due to specialisation

  exchanging own specialisation with another economies as can’t produce it themselves