1.1.5 Specialisation and the division of labour

• Specialisation:


  When individuals, firms or nations focus production on a narrow range of goods or services.
• Division of labour:


  Specialisation by workers who perform different tasks at different stages of the production process.
• Advantages and disadvantages of division of labour?

  (+): Workers become very skilled and productive at one task. This increases output and also reduces unit costs (as less time is spent on making each good).

  (-): Boring for workers; more likely that they can be replaced by machines -> higher unemployment.
• Functions of money - Medium of exchange:


  Money can be used to purchase goods and services.
• Functions of money - A measure of value:


  The value of goods can be measured by their price. E.g. if a shirt costs $15 and a coat costs $30, then the coat is twice as valuable as the shirt.
• Functions of money - A store of value:


  Money can be saved and used to purchase goods in the future.
• Functions of money - A method of deferred payment:


  Consumers and firms can take out loans to allow them to pay for goods overtime.