1.1.5 - specialisation and division of labour

Question 1

What is specialisation?

Answer 1

The production of a limited range of goods by a individuals, firms or nations which means trade is required because individuals produce only one good or service and exchange it to obtain others, ensuring a good standard of living

Question 2

What is division of labour?

Answer 2

Production is broken down into many separate tasks which are divided up among the workers.

Question 3

What are some advantages of division of labour?

Answer 3

Increased output per worker, reducing transmission times between tasks, quality of output and labour

Question 4

What are some disadvantages of division of labour?

Answer 4

Fall in productivity due to repetitive work (higher work turnover, destruction of creativity, quality issues), structural unemployment, gap in labour/knowledge if someone leaves work

Question 5

What are the advantages specific to specialization?

Answer 5

Benefits agglomeration, international trade due to surplus output (variety of goods due to imports)

Question 6

What are the disadvantages specific to specialization?

Answer 6

Over-reliance makes units vulnerable to staff illness/strikes or economic shocks, over-dependence from countries over a particular export

Question 7

What is money?

Answer 7

Anything generally accepted in payment of a debt; removes the needs to barter (trading goods and services through swapping one good for another), avoiding double coincidence of wants

Question 8

What has money allowed for?

Answer 8

• Reduces the cost of exchange/trade from bartering
• Encourages trade which allows for greater specialisation

Question 9

What are the four functions of money?

Answer 9

Medium of exchange, store of value, unit of account, standard of deferred payment

Question 10

What does the ’medium of exchange’ function mean?

Answer 10

Money is any asset widely acceptable as a medium of exchange, which facilitates transactions between a buyer and seller; specialisation/division of labour requires a means of exchanging goods and services

Question 11

What does the ‘store of value’ function mean?

Answer 11

Asset that holds value over time, meaning it can be used now or in the future, allowing savings

Question 12

What does the ‘unit of account’ function mean?

Answer 12

Allows the value of something to be expressed in an understandable way and value of items to be compared

Question 13

What does the ‘standard of deferred payment’ function mean?

Answer 13

The accepted way, in each market, to settle a debt