Specialization occurs at different levels of economic activity and can provide several key advantages. It involves concentrating production on specific products or tasks. Within businesses and organizations, specialization allows workers to focus on discrete tasks and gain expertise through repetition, improving productivity. Countries and regions also specialize in goods where they have a comparative advantage. While specialization increases output and profits, it can result in repetitive work that lacks variety and skills, potentially reducing worker satisfaction over time.

1. Economics
of
Specialisa/on
EdExcel
1.1.5

2. What
is
Specialisa/on?
• Specialisa/on
is
when
we
concentrate
on
a
product
or
task
• Specialisa3on
happens
at
all
levels
of
economic
ac3vity:
1. Specializa3on
of
tasks
within
extended
families
in
many
of
the
world’s
poorest
countries
2. Within
businesses
and
organiza3ons
e.g.
in
mass-­‐
manufacturing
of
vehicles
or
in
the
building
industry
3. In
a
country
–
Bangladesh
is
a
major
producer
and
exporter
of
tex3les;
the
USA
is
a
leading
shale
oil
and
gas
supplier.
And
Ghana
is
one
of
the
biggest
producers
of
cocoa
in
the
world.
4. In
a
region
of
a
country
–
for
many
years
the
West
Midlands
has
been
a
centre
for
motor
car
assembly,
there
has
been
huge
investment
in
recent
years
in
the
Mini
plant
at
Oxford.
Specialisa3on
in
locali3es
/
regions
can
lead
to
the
benefits
of
agglomera/on

3. The
Division
of
Labour
• The
division
of
labour
occurs
where
produc3on
is
broken
down
into
many
separate
tasks.
• Division
of
labour
can
raise
output
per
person
as
people
become
proficient
through
constant
repe33on
of
a
task
• This
is
called
“learning
by
doing”.
• This
gain
in
produc3vity
helps
to
lower
the
supply
cost
per
unit
• Reduced
supply
costs
in
theory
lead
to
lower
prices
for
consumers
of
goods
and
services
causing
gains
in
economic
welfare
Specialisa3on
of
task
in
the
produc3on
process……………
Can
lead
to
higher
output
per
person
/
per
hour
worked

4. Some
of
the
Key
Advantages
from
Specialisa/on
Higher
labour
produc3vity
and
business
profits
• Learning
by
doing
increases
output
per
hour
worked
• Higher
produc3vity
lowers
the
unit
cost
of
supply
• Increased
produc3vity
leads
to
higher
profits
for
businesses
Specialisa3on
creates
surplus
output
that
can
then
be
traded
interna3onally
• The
theory
of
compara3ve
advantage
is
key
to
this
• Businesses
/
countries
specialize
in
areas
of
rela3ve
advantage
Lower
prices,
higher
real
incomes
an
GDP
growth
• Lower
prices
gives
consumers
greater
real
purchasing
power
• Higher
produc3vity
allows
businesses
to
pay
increases
wages
• Successful
specializa3on
is
one
of
the
key
causes
of
growth

5. Disadvantages
of
Specialisa/on
and
Division
of
Labour
1. Unrewarding,
repe33ve
work
that
requires
li^le
skill
can
lower
mo/va/on
and
eventually
causes
lower
produc/vity.
2. Workers
may
take
less
pride
in
their
work
and
quality
suffers.
3. Dissa3sfied
workers
become
less
punctual
at
work
and
the
rate
of
absenteeism
increases.
4. Many
people
may
choose
to
move
to
less
boring
jobs
crea3ng
a
problem
of
high
worker
turnover
for
businesses.
The
highest
labour
turnover
is
in
retailing,
hotels,
catering
and
leisure,
call
centres
and
other
lower-­‐paid
private
sector
services
groups.
5. Some
workers
receive
li^le
training
and
may
not
be
able
to
find
alterna3ve
jobs
if
they
find
themselves
out
of
work
-­‐
they
may
then
suffer
structural
unemployment
/
occupa/onal
immobility
6. Mass-­‐produced
standardized
goods
lack
variety
for
consumers.

6. Short
Run
and
Long
Run
in
Economics
Short
Run
• At
least
one
factor
input
is
fixed
Long
Run
• All
factors
of
produc3on
are
variable

7. Factors
of
Produc/on
(Factor
Inputs)
Factors
of
produc3on
are
the
inputs
available
to
supply
goods
and
services
in
an
economy.
Land
Labour
Enterprise
Capital
Natural
resources
available
for
produc3on
The
human
input
into
the
produc3on
process
Goods
used
in
the
supply
of
other
products
e.g.
tech
Entrepreneurs
organise
factors
of
produc3on
and
take
risks

8. Capital
and
Consumer
Goods
• Capital
goods
– Goods
that
are
used
to
make
consumer
goods
and
services
– Capital
inputs
include
fixed
plant
and
machinery,
hardware,
socware,
new
factories
and
other
buildings
• Consumer
goods
and
services
– Goods
and
services
which
sa3sfy
our
needs
and
wants
directly
– There
is
a
sub-­‐division
between:
– i)
Consumer
durables:
Products
that
provide
a
steady
flow
of
sa3sfac3on
/
u3lity
over
their
working
life
(e.g.
a
washing
machine
or
using
a
smartphone).
– ii)
Consumer
non-­‐durables:
Products
that
are
used
up
in
the
act
of
consump3on
e.g.
drinking
a
coffee
or
turning
on
the
hea3ng)
– iii)
Consumer
services:
E.g.
a
hair
cut
or
3cket
to
a
show

9. The
Difference
between
Produc/on
&
Produc/vity
Exam
reports
confirm
that
it
is
important
for
students
to
make
clear
the
dis3nc3on
between
produc/on
and
produc/vity
• Produc/on
• Produc3on
is
a
measure
of
the
value
of
the
output
of
goods
and
services
e.g.
measured
by
na3onal
GDP
or
an
index
of
produc3on
in
specific
industry
such
as
car
manufacturing
• Produc/vity
• A
measure
of
the
efficiency
of
factors
of
produc3on
• Measured
by
output
per
person
employed
• Or
by
output
per
person
hour
• An
increase
in
produc3on
DOES
NOT
automa3cally
mean
an
increase
in
produc3vity
–
it
depends
on
how
many
factor
inputs
have
been
employed
to
supply
the
extra
output

10. Produc/vity
Produc3vity
measures
the
efficiency
of
the
produc3on
process
• In
the
long
run,
produc3vity
is
a
major
determinant
of
economic
growth
and
of
infla3on.
• A
fall
in
labour
produc3vity
leads
to
a
rise
in
firms’
(unit)
costs
of
produc3on
(assuming
that
the
level
of
wages
remains
the
same)
• Higher
produc3vity
allows
businesses
to
pay
higher
wages
and
achieve
increased
profits
at
the
same
3me.
Factor
Inputs
(land,
labour
and
capital)
Factor
Produc/vity
(efficiency)
Output
of
goods
and
services

11. Degree
of
compe33on
in
a
market
/
industry
Advances
in
produc3on
technology
Investment
in
appren3ceships
/
training
to
boost
labour
skills
Quality
of
the
management
in
a
business
Some
Factors
Affec/ng
Labour
Produc/vity
Many
demand
and
supply-­‐side
factors
affect
labour
produc3vity
Specialisa3on
(division
of
labour)
within
a
businesses
Higher
business
investment
in
new
capital
inputs
Having
a
high
quality
na3onal
infrastructure
including
transport
Level
of
demand
for
a
product
in
a
market
–
using
up
spare
capacity

12. Economics
of
Specialisa/on
EdExcel
1.1.5