Chapter 2.3 Economics

How is a division of labor accomplished?

1. The manager can assign tasks according to individual preferences and abilities. 2. Workers who perform the same task again and again get better at it.

What advantages may be offered by a division of labor in addition to allow workers to become more accomplished at the tasks they complete?

1. takes advantage of individual preferences and natural abilities 2. allows workers to gain experience at a particular task 3. reduces the need to shift between different tasks 4. permits the introduction of labor-saving machinery

medium of exchange

Anything that is used to determine value during the exchange of goods and services

division of labor

Division of work into a number of separate tasks to be performed by different workers

specialization

Each person specializes in the task that he or she is good at preforming, enabling each worker to become more efficient and productive

What are the gains from specialization and exchange

People specialize in a certain activity, then they can exchange the their products for money, which is exchanged for goods and services. Specialization and exchange create more interdependence in an economy

Why does specialization require people to complete exchange?

The money that the person makes from the products is used to my goods and services to keep the production moving.

law of comparative advantage

The worker, firm, region, or country with the lowest opportunity cost of producing an output should specialize in that output

What is the law of comparative advantage?

The worker, firm, region, or country with the lowest opportunity cost of producing an output should specialize in that output.

How does money help people complete exchanges

They are then able to use the money that they make and be able to support the business.

absolute advantage

This means your are able to produce something using fewer resources that other producers require.

barter system

a system of exchange in which goods or services are traded directly for other goods or services without the use of money.