Tuesday, January 28, 2014
More Videos on Specialisation
If you think that division of labour/ specialisation is only limited to professions/ working people, these two videos above might change the way you look at things. Basically, it also covers interests/ hobbies and when people are passionately doing the same thing over and over again, they become skilled at it and they will always discover fun and interesting ways to do it
Monday, January 20, 2014
Reviews of MCQ For Chapter 1 (AS): Basic Economic Ideas
Answer A:
The roles of an entrepreneur are managing the other three factors of production and accepting the risks involved in a business
Option B, C and D are all related to management
Answer B:
Division of labour or specialisation means a worker/ group of people will perform the same small tasks repetitively. If a market is small e.g. small population or less buying interest, then fewer output will be produced and that means lesser repetitions. A worker may still gain the skill but it would have been better if he or she produces more
Option A and C are irrelevant. Option D is incorrect. Division of labour increases productivity not lowers it
Answer C:
Straight forward question. Civil engineers refer to human capital/ labour. Rail, road and electricity infrastructure are known as capital goods because they are man-made resources that aid us in the production process
Option A, B and D are all irrelevant
Answer B:
This is a straight forward question. Resources are scarce/ limited/ finite but human wants are unlimited/ infinite. Therefore, all economic agents are forced to make a choice on how to possibly best use the scarce resources. If they choose one, they may not be able to have the other. This means the need to carefully allocate resources in between uses
Option A is wrong. That is more of a macroeconomic aim by a government
Option C is incorrect. This would probably be a typical goal for an enterprise
Option C has the same nature with A. This is the common goal for all governments.
Answer A:
Before technological progress, to produce OX consumer goods, the opportunity cost is YF capital goods. After technological progress, the PPC will shift outward from EF to GH. To produce the same number of OX consumer goods, MH capital goods will be forgone
B is wrong. It will be the opportunity cost of producing OG units of consumer goods
D is incorrect. That is the original opportunity cost before technological progress
Answer C:
An inward movement of the PPC is always due to a fall in the quantity or/ and quality of resources. When there are fewer resources, the maximum ability of the economy to produce will be hindered e.g. tsunami in Indonesia (2004) or typhoon Haiyan (2013). Equally a fall in the quality of resources such as human capital will lead to a fall in potential capacity of a nation and so lesser output will be produced
Option A is obviously wrong. With technological progress, the PPC will shift outward instead of inward
Option B is also wrong. When resources are unemployed such as unemployment of workers during the recession, it will be represented by a point moving away from the PPC rather than a whole shift
Option D is incorrect. When resources are reallocated, it could be the case where more good Y is produced at the expense of good X. This shows opportunity cost and the movement will be along the PPC
Answer B:
The term comparative advantage may have confused some of the candidates here. Basically, it means that this country is able to produce good Y at a lower opportunity cost than other countries. Since that is the case, this country should therefore specialise in the production of good Y and perhaps lesser of good X and then sell it to the world. This will be taught in Chapter 4 (AS): International Trade. Getting back to the question, LM is the PPC of this country and if all resources are fully and efficiently used, the best it can operate is along the LM line. There are three ways to achieve point R. First, increase in the QUANTITY of resources. Second, increase in the QUALITY of resources and finally engage in INTERNATIONAL TRADE. By importing additional both good Y and X, this country will be able to consume beyond its own PPC
Option A is wrong. It has been stated that this country has comparative advantage in good Y
Option C is wrong. By reducing unemployment, this economy is said to have better managed/ used all its available resources and so a point within the PPC will move closer to the boundary of LM rather than beyond it
Option D is also wrong. While this country has comparative advantage in good Y and should therefore specialise in it, it does not help to attain the position of R
Answer D:
Private production such as personal cars, private education, private healthcare, cosmetic products and others to cater for those who are willing and able to pay exists in both free market and mixed economy
Option A is wrong. Capital goods refer to man-made tools like sophisticated machineries, lorries, tractors and ships which are meant to assist us in the production process. They are present in both mixed and planned economy
Option B is wrong. Consumer surplus refers to the difference between what consumers are willing and able to pay and what they actually need to pay. In all three economic systems, such feature definitely exists. There will always be some people who are willing to pay more (positive consumer surplus) while some refuse to (negative consumer surplus) depending on the level of benefits/ satisfactions derived from the consumption of a good or service
Option C is wrong. All governments do engage in borrowing
A planned economy/ command economy/ communist economy refers to an economic system where all scarce resources (land, labour and capital) are owned and allocated by the government. There are no such thing as private enterprise and consumer interest. In fact these two are strictly prohibited and if such elements are found, the person/ entity may have to undertake severe punishments. The government itself believes that the welfare of the people is better managed in such way since there is no aim to maximise profits. Also, all decisions are made with the public interest in mind and that means after considering all the pros and cons of projects
B is wrong. Governments in market economy, planned economy and mixed economy are unlikely to run a balanced budget. They will either incur a deficit (government spending > tax revenue) or surplus (government spending < tax revenue)
C is wrong. This refers to a free market economy where consumer sovereignty exists
D is wrong. Regardless of which economic systems that we refer to, a machinery cannot easily replace a manual worker and likewise is true. This is the case of occupational immobility
Answer D:
‘Best way’ is a value judgement. It reflects an opinion
which is highly debatable. A person may claim that indirect taxes are the best
solutions but another person may argue that ban of smoking in open places, ban
of smoking advertisement or introduction of nicotine replacement products as substitutes
are better solutions. In fact, both persons are correct
A, B and C are positive statement because all of them
can be testified true or false. For A, it is a true statement that money is
more liquid than say, property or stocks. B is again positive because it is
true that some firms subsidised by government while some not. C is also
positive because it is true that doctors generally earn more than cashiers and
this cannot be debated.
Answer C:
A normative statement contains value/ subjective
judgement. They cannot be testified true or false and instead, stand in
between. This is because opinions can be debated unlike facts. As in this case,
the phrase ’more harmful’ reflects a subjective judgement. Another person may
argue likewise e.g. inflation is more harmful than joblessness
A, B and D are positive because inflation and
unemployment are measurable. To testify the relationship between the two, we
can usually refer to the annual statistics published by ONS (Office for
National Statistics). If the claim is true as reflected by the data then it has
to be a true fact (positive). If the claim is false as reflected by the data,
then it has to be a false fact (positive). Most importantly, facts cannot be
debated
Economics of Specialisation (AS-CIE)
Division of labour or specialisation is where a
sophisticated/ complicated task is divided into many smaller parts each done by
a small group of workers or individually
Where do we see the division of labour?
In fact it is too common and everywhere. In case if
you don’t realise, look around you or even consider yourself as an example. In
a car factory, we have people like the design engineers, assemblers,
technicians who test-drive the cars, marketing personnels and many more. In a
restaurant, there are chefs, cashier, waiters and waitresses. In the education
industry, we have subject specialists, administrative staffs, manager of the
A-Level department, counsellors and others. At individual level, we do specialise.
If you represent your school for a badminton competition, then you are said to
be specialising in that sport. If you can play a guitar of all the musical instruments
out there, then perhaps you are a guitar specialist
Why is division of labour important?
For many obvious reasons:
1. When a worker is performing the same task
repetitively, he or she becomes good at it. Over the time, it becomes so easy
to the extent where effort and thinking are no longer required. It is just so
automatic. This is the benefit to a factory worker. In some other professions
such as property sales consultant, mortgage loan officers and insurance agents,
being more skilled means greater income since they can easily seal more deals
2. Having more skilled workers is also good for a factory
or firm. Since the workers are so efficient, it can actually refrain itself
from hiring as many workers as before. In other words, wage costs will fall
because a firm now hires fewer employees
3. Revenue and perhaps profit will increase. A skilled
worker will reduce customer complaints, reduce their waiting time and improve
their welfare. This will keep them coming back. An experienced hair stylist
will be able to serve more customers in two hours than a less skilled one. Equally,
an experienced chef is very important because lunch and dinner are the best
time to increase sales due to high traffics. If customers are told to wait very
long for their food to be served, the restaurant stands to lose the additional total
revenue that could have been generated. On top of that, dissatisfied customers
will unlikely return which may affect its business position in the long term
4. Without specialisation, a factory will have to buy
equipments for all the workers so that they can perform their job. However,
this is not without problems. First, it is not possible to equip each employee
with machine to work with as this will be very ridiculously expensive. Second,
there is an issue of limited space within an office or factory. After
specialisation, the usage of machineries is more cost-feasible as only a small
group people will be assigned to it. This will increase the overall level of
productivity boosts by division of labour and usage of tools
5. Production process becomes possible with
specialisation. As an example, consider the production of aircrafts and
container ships. Without specialisation, a person will have to master the art of
production from A to Z and considering that aircrafts are so complicated, he or
she is going to use the entire lifetime just to learn how to manufacture it. By
then, maybe 20 years have passed and nothing is produced. This also indicates
that demand cannot be met. The same goes for lecturing. If I was told to teach
Mathematics, Physics, Chemistry, Biology and Economics, maybe after 5 years I’m
still learning it. A college will not be able to function that way. Upon
division of labour, a person just has to master the discipline he is allocated
to. Operation becomes possible
6. Jobs can be created from the division of labour. Instead
of performing all the tasks on a solo basis, now there will be different people
doing different thing within the factory or office. More jobs are created which
can be beneficial to the national economy
Specialisation is not without problems:
1. If a task is too simple and repetitive, then workers
may find it boring. It will not be long before the productivity falls. This is
a problem because once workers begin to take less pride in their work, quality
may suffer, absenteeism may increase and some will be less punctual to their
workplace
2. The second disadvantage is related to the first. Once
they reach the point where they find themselves learning nothing, they will
most likely call it a quit. Highest labour turnover is found in retailing,
hotels, catering and leisure, call centres and other lower paid private sector
services jobs. The problem that has been created is, firms have to consistently
waste money to advertise and time to train new ones
3. Specialisation creates over dependency. If one part of
the production process is affected, perhaps the whole assembly line could grind
to a halt. As an example, when there was a tsunami in Japan and flood in
Thailand in the recent years, production of Honda and Toyota cars in other
parts of the world was affected simply because the production plant is
temporarily shut and so there were no spare parts manufactured
Does division of labour necessarily lead to boredom?
This question has both ‘yes’ and ‘no’ as an answer.
Jobs that are routine, simple and that can be done by anyone can easily lead to
boredom
However, being an Economics lecturer can be quite fun.
I get to interact with different people every day and see different students
almost every term. The subject itself is so broad that in fact I am still
learning new things from the world as well as students despite having ‘mastered’
the subject. Each day, there will be new case studies and different scenarios
which require unique approach to deal with and many more. In a nutshell, my
profession is quite sophisticated and learning is dynamic rather than static.
Personally, I find it thrilling than say, being a cashier
How does the division of labour create more
efficiency?
1. Mastering one small part is way easier than the whole
complicated process
2. Workers no longer need to move around. By staying put
in one place, more works can be done.
3. Consider a chef who no longer needs to simultaneously assume
the role of a waiter
4. People get to choose the discipline that they are
passionate in rather than being told to perform tasks that they dislike. As
long as they are interested, they will be more passionate and naturally become
good at it
I will talk about international division of labour in
another post
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