Specilisation, Division Of Labour Exchange 4.1

Question 1

What is specialisation ?

Answer 1

Specialisation occurs when each worker completes a specific task in a production process. Firms can then take advantage of increased efficiency and lower average costs of production

Question 2

What are the advantages of specialisation ?

Answer 2

Higher output and potentially higher quality, since production focuses on what people and businesses are best at
There could be a greater variety of goods and services produced
There are more opportunities for economies of scale, so the size of the market increases
There is more competition and this gives incentives for firms to lower their costs, which helps keep prices down

Question 3

What are the disadvantages of specialisation ?

Answer 3

Work becomes repetitive, which could lower the motivation for workers, potentially affecting quality and productivity. Workers could become dissatisfied
There could be structural unemployment, since skills may not be transferable, especially since workers have focused on one task for too long
By producing lots of one type of good through specialisation, variety could decrease for consumers
There could be higher worker turnovers for firms, which means employees become dissatisfied with their jobs and leave regularly

Question 4

What are the advantages of countries using specialisation in the production of goods and services to trade ?

Answer 4

Greater world output so there is a gain in economic welfare
Lower average costs, since markets become more competitive
There is an increased supply of goods to choose from
There is an outward shift in the PPF curve

Question 5

What are the disadvantages of countries using specialisation in the production of goods and services to trade ?

Answer 5

Less developed countries might use up their non renewable resources too quickly, so they might run out
Countries could become over dependent on their exports of one commodity such as wheat. If there are poor weather conditions, or the price falls, then the economy would suffer

Question 6

What are the 4 functions of money ?

Answer 6

A medium of exchange
A measure of value
A store of value
A method of deferred payment