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Specialisation, Exchange and Production Possibilities

Specialisation, Exchange and Production Possibilities . 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 . Benefits of Specialisation and Trade .

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Specialisation, Exchange and Production Possibilities

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  1. Specialisation, Exchange and Production Possibilities

  2. 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

  3. Benefits of Specialisation and Trade • Increases output for all countries if each specialises in their strength. (Bananas wouldn’t grow well in Cheshire) • Greater variety of goods and services available. • Trade is the means by which economies grow. Developing become Developed (e.g.China’s economy doubles every 7yrs)

  4. 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?

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

  6. 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

  7. 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:

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

  9. 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

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

  11. 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.

  12. Guns Butter Production Possibility • Choice in the National Economy

  13. Guns A 100 ● B 40 ● 3,000 8,000 Butter Trade-offs • Explain using figures, how moving from Point A to Point B illustrates ‘opportunity cost’?

  14. Military Goods Consumption Goods Production Possibility Curve • Reallocation of resources & factor mobility • Production Frontier • Transformation Curve

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

  16. Capital Goods ● D ● A Shift Movement C ● ● ● B E Consumption Goods Movements and Shifts

  17. Outward shift of PPC • Two Reasons; • Economic Growth • Change in productive potential of an economy • Technological Change • Improvements in technology

  18. Consumer Goods A 100 ● B 40 ● 3,000 8,000 Capital Increasing Productive Potential of PPC • Explain how a reduction in producing consumer goods is good for an economy

  19. How are some countries better off than others?

  20. Why is USA rich and Tongo poor? • Why are some countries able to produce more goods and services than others? • World’s poorest countries tend to have few/poor FACTOR ENDOWNMENTS. • Factors of production are more productive to achieve greater economic growth.

  21. Factor Endowment What would be the stock of factors of production in; • UK • Brazil • Japan • India

  22. 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

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

  24. The Economic System • Free Market • Command Economy • Mixed Economy • Complete Q on Mixed Economy AS Book p.19

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