Occurs when individual workers concentrate on a particular task within the production process
Division of labour
When the production process is broken down into a sequence of simpler stages
Adam Smith
First economist to write about the advantages of specialisation and the division of labour
Advantages of specialisation
Increased productivity, improved quality and reduced waste, lower prices for consumers, higher output, more innovation, less time wasted, a bigger market
Disadvantages of specialisation
Boredom, high labour turnover, risk of structural unemployment, reliance on a narrow range of products, limited market size, specialisation in non-renewables is unsustainable, lack variety, if one part of system breaks then line of production stops
Four roles of money
Standard for deferred payment, unit of account, medium of exchange, store of value
Why a market economy uses money
Double coincidence of wants is avoided, market forces of supply and demand are allowed to guide the allocation of resources
