Specialisation
When a worker, firm or country focuses on one good/service.
Specialisation and division of labour
Key definitions
Division of labour
Labour divided so each worker performs one task in production.
Productivity
Output per unit of input in a given time period.
Average cost
Total cost divided by total output.
Adam Smith
Classical economist; argued markets work via the invisible hand.
Wealth of Nations
Smith's famous book on markets and specialisation.
Pin factory
Smith's example — division of labour raised output dramatically.
Functions of money
Medium of exchange, store of value, unit of account, standard for deferred payment.
Exchange
Specialisation requires trade between specialists.
Efficiency
Workers become skilled at repeated tasks, reducing waste.
Key concepts
Smith's pin factory: 10 workers using division of labour produced 48,000 pins per day vs 200 without it.
Higher productivity spreads fixed costs, lowering average cost.
Specialisation increases dependence on others and trade.
Relevant tips
- Use the pin factory example for application marks on specialisation essays.