2.1.2 Specialisation and Exchange

Question 1

specialisation

Answer 1

The process by which individuals, firms, regions and whole economies concentrate on producing those products that they are best at producing.

Question 2

exchange

Answer 2

The giving up of something that the individual or fi rm has, in return for something they wish to have but do not possess.

Question 3

specialisation for producers

Answer 3

World output has increased through firms specialising in different
types of products. Manufacturers, for example, concentrate on the
end product and very often buy in most, or all, of the components
from other manufacturers. This enables them to gain more
benefi ts such as large economies of scale (see Chapter 2.6).
In addition, producers must exchange the income they earn by
selling their products for the components they need to enable
them to produce. Table 2.1.1 shows the benefits and costs to
producers of specialisation and exchange.

Question 4

specialisation for workers

Answer 4

All workers today specialise unless they aim to be totally selfsuffi cient and make and produce everything they need. By
specialising, a worker exchanges their labour for money. With
this money they can then buy the products they need and want.
Specialisation can take the form of an expert in a particular type of work such as an economics teacher, an electrical engineer or
a hospital consultant. It can also occur when a worker performs
only one part of a production process, such as checking the
weight of bags of crisps on the conveyor belt on a production line or working in the lighting department of a shop. Specialisation by individuals, as in the cases mentioned, is called the division of labour. Table 2.1.2 shows the benefits and costs to workers of specialisation and exchange.

Question 5

specialsation for regions

Answer 5

Question 6

specialisation for countries

Answer 6