THE DIVISION OF LABOUR

All economic agents live in a world where they are dependent on other agents. Rather than be self sufficient, agents contribute to the economic process through the process of specialisation.

Specialisation: the breaking down of the overall production process into smaller parts, so that co operation and sharing occurs in production.

Global specialisation: countries specialise in the production of specific goods dependent on their resource base, and the quality of their resources. Italy concentrates on producing pasta, which it trades for cars from Japan.

Regional specialisation; within the UK, Scotland produces Whisky which it trades for wool from sheep reared in Wales.

Individual specialisation: the division of labour where individuals concentrate on specific jobs. College lecturers concentrate on teaching certain subjects, whilst on a car production line, workers carry out different tasks to make a complete car.

For specialisation to succeed, markets need to exist where the output of different workers, regions and countries can be traded. School teachers will use some of their income to purchase cars, whilst the car workers will use some on their income to purchase pasta and pizzas.

Specialisation should bring benefits to an economy:

productivity can increase: the worker becomes specialised in one job, which should lead to improved performance. Output per worker should increase.
falling average costs: as productivity increases, the average cost of producing each unit falls.
Increased competitiveness: as costs per unit fall, organisations and countries should be able to compete more effectively with their competitors 

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