1.1.5 Specialisation and the division of labour

• Specialisation


  When each worker completes a specific task in a production process
• Adam Smith: 'Through the division of labour, worker productivity can increase'
• Specialisation


  Can be achieved by individuals, businesses, regions of countries or countries themselves
• Countries can specialise in the production of certain goods and trade to get goods they are unable to produce
• Comparative advantage


  A country can produce a good at a lower opportunity cost than another country
• Absolute advantage


  A country can produce more of a good with the same factor inputs
• Medium of exchange


  Money eliminates the need for a double coincidence of wants in barter transactions
• Measure of value (unit of account)

  Money provides a means to measure the relative values of different goods and services
• Store of value


  Money can be kept for a long time without expiring, although the quantity of goods and services it can buy fluctuates
• Method of deferred payment


  Money can allow for debts to be created and paid for later