Specialisation

Real-world examples of industries that make extensive use of division of labour:

• Vehicle assembly
• Construction industry
• Smartphone assembly

Advantages from specialisation (division) of labour:

• Higher productivity and efficiency – e.g. rising output per person hour
• Lower unit costs leading to higher profits
• Encourages investment in specific capital – economies of scale

Disadvantages from specialisation (division) of labour:

• Risk of worker alienation
• Risk of disruptions to production process
• Risk of structural unemployment due to occupational immobility

Advantages for a country specializing in goods and services to trade

• Allows a country to make full use of their economic resources
• Increases the scale of production – leads to lower costs and prices
• Surplus can be exported, an injection into the circular flow of income

Disadvantages for a country specializing in goods and services to trade

• World prices for a product might fall leading to declining revenues
• Risk of over-specializing and structural unemployment
• Might lead to over-extraction of a country’s natural resources