Specialisation, Exchange and Production Possibilities

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• Specialisation, Exchange and Production
  Possibilities

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Is it feasible for UK to grow its own bananas?

• Specialisation The concentration of a firm or
  economy to produce a particular good or service.
• Exchange Process of trading goods and services

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Benefits of Specialisation and Trade

• Increases output for all countries if each
  specialises in their strength. (Bananas wouldnt
  grow well in Cheshire)
• Greater variety of goods and services available.
• Trade is the means by which economies grow.
  Developing become Developed (e.g.Chinas economy
  doubles every 7yrs)

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Where are these goods and services produced?

• Oil
• Wheat
• Digital TVs
• Cars
• Movies
• Identify these products as good or service. Can
  they be classified as a Factor of Production too?

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• Check the Label on your clothing. Where was it
  made?
• List reasons why are many products made in Asia?

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Drawbacks of Specialisation

• Resources can run out (e.g. Oil, copper). What
  happens then?
• Cheap imported goods means manufacturing jobs are
  lost in UK
• Weather affects production (Russian fires
  affecting wheat prices)
• Consumer tastes change leaving countries exports
  vulnerable (tourism)
• Global disasters can now affect people millions
  of miles away Increased globalisation means we
  are ill interdependent.
• Primark prices going up due to Pakistan floods.
  Explain Why?
• Complete Activity p.9 AS Book

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Division of Labour

• To ensure competitiveness once a firm or economy
  specialises in production of a good or service.
  Labour costs must be kept low.
• Definition Specialisation of labour into
  separate tasks.
• This insures higher PRODUCITIVTY per worker
• Define productivity

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• Explain why your clothes from Asia are so
  inexpensive.
• Use the concepts of
• Specialisation
• Division of labour

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Specialisation

• What is the role of Money in Exchange
• What does Barter mean? Why is the system not
  used today.
• Why is Division of Labour important
• Are these things compatible
• Growth and Happiness

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PPC

• Define
• Production Possibility Curve
• The maximum quantities of different combinations
  of output of two products, given current
  resources and technology.

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Production Possibility

• What does the PPC show us?
• It is a simple model to show how resources are
  allocated which takes account of scarcity and
  choices.
• Why would the production possibility be different
  in the UK than Uganda?
• Different quantity and quality of factors of
  production.

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Production Possibility

• Choice in the National Economy

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Trade-offs

• Explain using figures, how moving from Point A to
  Point B illustrates opportunity cost?

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Production Possibility Curve

• Reallocation of resources factor mobility

• Production Frontier
• Transformation Curve

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PPC Activity

• Read p.12-13 AS Book
• Complete Activity on p.13

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Movements and Shifts
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Outward shift of PPC

• Two Reasons
• Economic Growth
• Change in productive potential of an economy
• Technological Change
• Improvements in technology

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Increasing Productive Potential of PPC

• Explain how a reduction in producing consumer
  goods is good for an economy

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• How are some countries better off than others?

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Why is USA rich and Tongo poor?

• Why are some countries able to produce more goods
  and services than others?
• Worlds poorest countries tend to have few/poor
  FACTOR ENDOWNMENTS.
• Factors of production are more productive to
  achieve greater economic growth.

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Factor Endowment

• What would be the stock of factors of production
  in
• UK
• Brazil
• Japan
• India

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Factor endowment

• The issues of inequality in the World is more
  complex than factor endowments, but this is one
  way of understanding disparities (differences)
  between
• Developed and Developing economies
• Discuss the merits of globalisation
• Use key concepts of specialisation and economic
  growth

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Economic Systems

• Different countries arrange their economic
  resources differently
• Who answers the question
• What?
• How?
• For Whom?
• In market and
• planned economy

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The Economic System

• Free Market
• Command Economy
• Mixed Economy
• Complete Q on Mixed Economy AS Book p.19