1.1.5: Specialisation and the division of labour

• Factor mobility: Ability of the factors of production to move from one use to another
• Geographical mobility: Ability of resources to move from one area to another
• Occupational mobility: Ability of workers to do different types of work
• Labour may not be fully geographically mobile due to house prices, family and social ties, and children in school
• Labour may not be fully occupationally mobile, because of a lack of education and training
• Specialisation: Where individuals, firms or countries focus on producing a limited range of goods and services
• Division of labour: Where the tasks needed to produce an item are divided among workers
• Adam Smith believed that specialisation leads to increased productivity and growth
• Advantage of specialisation and division of labour: Increased productivity from the same resources
• Advantage of specialisation and division of labour: Lower costs due to reduced training time
• Advantage of specialisation and division of labour: Economies of scale make mass production possible
• Disadvantage of specialisation and division of labour: Workers might find tasks boring and repetitive over time, which leads to them not being satisfied
• Disadvantage of specialisation and division of labour: Structural unemployment could occur if a task is no longer needed, since workers only do one task
• Disadvantage of specialisation and division of labour: Mass produced and homogenous goods lead to reduced consumer choice
• Money: Anything accepted in payment. it removes the need for bartering
• Characteristics of money

  Acceptable to everyone

  Portable

  Durable

  Easily divisible

  Cannot be counterfeited

  Scarce in supply
• Functions of money

  Medium of exchange

  Unit of account: Used to measure value

  Store of value: Holds value over time

  Standard for deferred payment: Can be used to pay debt