4 SPECIALISATION AND THE DIVISION OF
LABOUR
1 Specialisation and division of labour
1) Specialisation is the production of a limited range of goods by an individual, firm or country in co-operation
with others so that together a complete range of goods is produced.
2) Globalisation is increasing the specialization.
3) Specialisation by individuals is called the division of labour.
2 The advantages and disadvantages of specialisation and the division of labour
1) Advantages of specialization and division of labour
• Increase in labour productivity and capital productivity
• Specialisation enables workers to gain skills in a narrow range of tasks, become more productive
• The division of labour makes it cost effective to provide workers with specialist tools
• Time is saved because a worker is not constantly changing tasks
• Workers can specialise in those tasks to which they are best suited.
2) Disadvantages of specialization and division of labour
• the work can become tedious and monotonous if jobs are divided up too much
• Workers do not feel connected to their work, result in poorer quality of work and less output per person
• Workers will do everything possible to avoid work
• Over-specialization can lead to unemployment
• Breakdown in part of the chain of production can cause chaos within the system
3 Sector of the economy
Primary sector (agriculture, fishing, extracting oil and mining)
1) Three main sectors Secondary or manufacturing sector (motor manufacturing, food processing)
Tertiary or service sector (transport, sport and leisure)
2) Also be split into two sectors
• Public sector (state-owned businesses)
• Private sector (owned by private individuals, companies and charities)
4 Function of the money
• as a medium of exchange
• a measure and store of value
• a method of deferred payment
5 The significance of these functions for specialisation
• Specialisation has enabled people to enjoy a higher standard of living than self-sufficiency;
• Specialisation requires exchange.
• The development of money has enabled trade and specialisation to be much easier and workable.
6 The role of financial markets
• to facilitate saving
• to make funds available to businesses and individuals
• to facilitate the exchange of goods and services
• to provide forward markets in commodities and currencies
• to provide a market for equities.
Question
1 Give two examples of specialisation from your own knowledge.
2 What is the difference between labour and capital productivity?
3 State two advantages and two disadvantages of the division of labour.
Past-paper
Question
5 Explain what function money has in improving specialisation in the productionof smartphones.
5 TYPES OF ECONOMY
1 Three main types of economy
1) Free market economies
• In free market economies, the majority of resources (such as education, defence, roads..etc.)
are allocated through markets rather than through government and planning.
• Example: Hongkong or USA
2) Mixed economies
• In mixed economies, more resources are allocated through government planning than in
free market economies.
• There tends to be a greater reallocation of income through welfare benefits.
3) Command economies (or planned or centrally planned) economies
• In command economies, most resources are allocated by the state and the market
mechanism only plays a small part.
• Example: Cuba and North Korea
2 The advantages and disadvantages of free market and command economies
Free market Command economies
Choice • Individual citizens on average have more choice; • Tends to produce uniform products;
• Consumers can choose from varies of products; • Workers being allocated jobs;
• People have choices about which jobs to apply for • Citizens also have far less income than
market economies;
Quality and • There are strong motivations to innovate and produce • Not enough incentive to innovate
innovation high-quality goods;
Efficiency • Markets tend to lead to efficiency because of • Workers and managers had little incentive
competition; to work efficiently
• Firms have to be efficient to survive and make a profit;
• However, competition maybe limited because a few
firms dominate those markets.
Economic • the more market-orientated an economy, the higher the • Government control is assumed to
growth rate of growth of its overall economy will be; discourage innovation and best practice.
• Markets are assumed to be dynamic;
• However, Free market economies do not have higher
rates of growth than mixed economies over time.
Distribution • Free market economies tend to have higher levels of • Higher levels of equality.
of income inequality.
and wealth
Risk • Free market economies tend to expose their citizens to far • There tend to be a birth-to-death group of
more risk; services and benefits provided by
• The poor can be left with no healthcare, no job, no house government.
and no food.
Political • Free market and mixed economies have been associated • Have limited political freedoms to enforce
freedom with political freedom. control.
3 The role of the state in a mixed economy
• Two key areas that distinguish free market and mixed economies are welfare benefits and healthcare.
• In mixed economies, there tends to be a greater reallocation of income through welfare benefits.
(such as state pensions, unemployment and sickness benefits and child benefits).
• Mixed economies also tend to be ones where the healthcare system is administered and
financed by the state.
• In free market economies, healthcare would be entirely financed by the private sector.
Question
1 What are the three basic questions that all economic systems must address?
2 What is the main difference, in the allocation of resources, between a free market
economy and a command economy?
Past-paper
Question
