Specialisation And Division Of Labour And Exchange Flashcards
What is productivity?
Productivity measures how much output is produced but a factor of production in a given period of time
What is labour productivity
Labour productivity tells you how much output is produced by labour in a given period of time
What is the division of labour?
Its when a firm splits up its production process into smaller separate tasks and assigns different workers to each task. This allows workers to specialise and become extremely productive.
If a firm benefits from specialisation and the division of labour,…
It will always reduce its unit cost of production as it expands its output
What is barter trading?
When one good is swapped for another good
What is the problem with barter trading?
It is hard to find someone that has what you want and wants what you have
What is the most important function of money?
The most important function of money is medium of exchange.
In order to specialise…
Firms and economies need the existence of a system of exchange
The use of money as a medium of exchange allows…
An economy to benefit from specialisation
Pros of specialisation and division of labour and exchange
-increases output
-increases quality
-firms save on training cost
-decreases unit cost (cost of production)
Cons of specialisation and division of labour
-increases absenteeism (when workers intentionally miss work)
-demotivation, as you would be bored from doing the same thing everyday, which will reduce productivity. As workers lose interest in their job it will reduce the quality of the products as they care less
-workers might quit their job to do something more interesting in their careers. This increases employee turnover (more workers quit) which leads to a decrease in production and will lead to extra recruitment and training
-can lead to unemployment if workers lose their jobs as it will be harder to find jobs since they specialise in one skill
Pros of specialisation in trade
-more variety
-more output
-increases trade which which helps the economy grow
Cons of specialisation in trade
-over-specialisation leading to unemployment
-depletion of natural resources such as oil
-more vulnerable e.g if train drivers go on strike you wont be able to use the trains as no one else specialises in driving a train so you cant go places such as work
