Specialisation And The Division Of Labour

Question 1

What is specialisation ?

Answer 1

Occurs when countries or individual focus their labour on a specific type of production.

Question 2

How does specialisation lead to an increase in labour productivity ?

Answer 2

• Workers will require less training to be an efficient worker
• the increase in labour productivity means firms will be able to benefit from economies of scale (lower average costs with increased output) and increased efficiency.

Question 3

What is division of labour ?

Answer 3

The breaking down of the production process into different tasks and assigning these tasks to different individuals.

Question 4

Examples of specialisation and division of labour

Answer 4

In the production of cars :
* workers design the car
* workers work on testing car
* workers work on marketing

Question 5

What does the theory of comparative advantage state ?

Answer 5

Countries should specialise in producing those goods where they have a lower opportunity cost (relatively best at producing).

Question 6

What does specialisation require ?

Answer 6

Trade

Question 6

What does specialisation mean for countries that produce no oil ?

Answer 6

They can consume oil products and countries with large reserves of raw materials can export them in exchange for other goods that they need.

Question 7

What problem does specialisation and trade help reduce ?

Answer 7

The problem of scarcity in individual countries and enables the PPF to shift outwards.

Question 8

Examples of specialisation within economies

Answer 8

• Oil in the Middle East
• South Korea and integrated circuits
• Thailand and Vietnam with computers and broadcasting equipment.

Question 9

Advantages of division of labour

Answer 9

• Increased output and productive efficiency
• Training is more cost-effective
• Cost of production falls, therefore profit increases, and consumers pay lower prices.

Question 10

Disadvantages of division of labour

Answer 10

• Boredom - by engaging in repetitive tasks workers may become bored and demotivated.
• Inflexibility - if individual workers over specialise, they may not possess skills to help when there is a shortage of labour in other areas of business.

Question 11

Advantages of specialisation

Answer 11

• Higher labour productivity and rising business profits
• A surplus output that can be traded for mutual benefit
• Lower prices cause higher real incomes and GDP growth.

Question 12

How is higher labour productivity and rising business profits an advantage of specialisation ?

Answer 12

• Learning by doing increases output per hour worked
• Higher productivity then lowers the cost of supply of goods and services
• Increased productivity leads to higher profits for business.

Question 13

How is surplus output that can be traded for mutual benefit an advantage of specialisation ?

Answer 13

• Business/countries specialize in areas of relative advantage
• Trade increases the range of products we can produce.

Question 14

How is lower prices that cause higher real income and gdp growth an advantage of specialisation ?

Answer 14

• Lower prices gives consumers greater real purchasing power
• Higher productivity allows businesses to pay increased wages
• Successful specialization is a key cause of economic growth.

Question 15

What behaviour do economists assume consumers and firms engage in ?

Answer 15

Rational behaviour.

Question 16

In the model of rational behaviour, what are the assumptions ?

Answer 16

• Consumers assumed to want to maximise their satisfaction from their actions; maximise their utility
• Firms assumed to be acting in their own best interest; maximise their profit.

Question 17

How are the assumptions from rational behaviour an advantage and disadvantage ?

Answer 17

• Advantage: allows economists to built models based on the idea that all consumers and firms will behave in the same
• Disadvantage: consumers and firms do not always act in their best interest and behave rationally, so economists may have to adjust their model for that.