5 Specialisation and the division of labour

Question 1

Specialisation

Answer 1

A method of production where a business or area focuses on the production of a limited scope of products or services to gain greater productive efficiency.

Question 2

Advantages of specialisation

Answer 2

1. Higher output: Total production is raised, and quality can be improved. Division of labour means a task is divided up into sections so that workers can complete their task accurately in less time. This means that specialisation can lead to increased productivity / efficiency.
2. Variety: Consumers have access to a greater variety of higher-quality products in different markets.
3. A bigger market and economies of scale: Specialisation and an expansion of global trade increases the size of the market offering opportunities for economies of scale to be exploited, which then leads to lower unit costs and lower prices for consumers.

Question 3

Disadvantages of specialisation

Answer 3

1. Some workers receive little training and may not be able to find alternative jobs when out of work – they then suffer structural unemployment arising from occupational immobility.
2. Mass-produced standardized goods may lack variety which damages consumer welfare.
3. There are dangers from over-specialisation. Farmers may become too reliant on one crop. At a macroeconomic level, a country may over-specialise in the supply of just a few products which makes them vulnerable to shocks in global demand. A good example is a country that specializes heavily in a natural resource such as copper or cocoa and there is a fall in demand and prices paid for their output.

Question 4

Division of labour

Answer 4

The specialisation of labour in specific tasks, intended to increase productivity.

Question 5

Why is division of labour good?

Answer 5

• Division of labour can raise output per person (productivity) as people become proficient through repetition of
  a task. This is called learning by doing.
• This gain in labour productivity then helps to lower the supply cost per unit for a business.
• Reduced supply costs in theory will lead to lower market prices for consumers of goods and services causing
  gains in economic welfare e.g. through an increase in consumer surplus

Question 6

Disadvantages of division of labour

Answer 6

1. Unrewarding, repetitive work can lower motivation causing lower labour productivity.
2. Workers may take less pride in work and therefore the quality of a good or service suffers.
3. Dissatisfied workers cause absenteeism to increase which increases costs for businesses.
4. People move to less boring jobs creating high worker turnover and increased hiring/training costs.
5. Increased risk of repetitive strain injuries at work – adding to the burdens facing the health service.

Question 7

For specialisation to be used…

Answer 7

there needs to be a medium of exchange so that trade can be sucessful

Question 8

Money

Answer 8

Money is defined best by what money does. Money – in its various forms – fulfils various key functions including a medium of exchange, a unit of account, a store of value and a standard of deferred payment.

Question 9

What are the main functions of money?

Answer 9

A medium of exchange
a store of value
a unit of account
a standard of deferred payment

Question 10

Medium of exchange

Answer 10

Money is any asset that is widely acceptable as a medium of exchange when buying goods and services in markets. It facilitates transactions between buyer and seller.

Question 11

A store of value

Answer 11

A function of money in that it can be used to save and be exchanged at a later time.

Question 12

A unit of account

Answer 12

A function of money, a nominal unit of measure or currency used to value/cost products, assets (e.g. houses), debts, incomes and spending.

Question 13

A standard of deferred payment

Answer 13

A function of money - the accepted way, in a given market, to settle a debt.

Question 14

Measure of value

Answer 14

A function of money where it can be used to judge the value of a good or service.

Question 15

Alienation

Answer 15

A sociological term to describe the estrangement many workers feel from their work, which may reduce their motivation and productivity. It is sometimes argued that alienation is a result of the division of labour because workers are not involved with the satisfaction of producing a finished product, and do not feel part of a team.