Describe the relationship between specialisation and trade

Specialization and Exchange |

describe the relationship between specialisation and trade

specialization depends on trade that is specialization leads tomass production and What is the difference between trade unions and employers association?. There is a connection between specialization and trade. In an ideal economic world free of trade barriers, countries should make the products that they can. Specialisation occurs when workers are assigned specific tasks within a production Specialisation and trade mean that countries that produce no oil can.

Specialization of plants and firms. The result tends to be the specialization of plants and, to some extent, of firms.

describe the relationship between specialisation and trade

For example, a spinning mill may specialize on a narrow range of counts, or a plant producing electric motors may specialize on a single size of motor. Although individual business enterprises may specialize to the same extent, there are important circumstances in modern developed economies that favor the multiplant, multiproduct firm: As an industry grows, the increasing specialization of firms, the development of by-product industries, and the expansion of subsidiary industries that supply means of production are all sources of what Marshall called external economies []vol.

Specialisation and division of labour

More broadly viewed, the whole industrial structure of the economy changes in response to economic growth and technological change. New industries come into existence and old industries subdivide. The industrial operations of an economy are an interrelated whole whose pattern of specialization is constantly changing, constantly revealing a new industrial fabric as economic progress occurs.

Well before Torrens and Ricardo, the view was developed e. Regions, like nations, are differently endowed with resources factors of productionand it follows that regional specialization, in accordance with the principle of comparative advantage, leads to increased efficiency in production. Regions differ in climate, qualities of soil, mineral resources, transportation facilities and their cost, quality and wage rates of different types of labor, and interest rates on borrowed capital.

Some of these differences would not persist in the presence of perfect mobility of capital and labor; but interregional mobility of these factors, while greater than international mobility, is far from perfect.

Agriculture is moderately localized by climatic, soil, and transportation circumstances. Mining and quarrying necessarily are highly localized. Some industries have become localized by the necessity of having easy access to one or more of the essential raw materials e. Other industries are located close to the markets for their products and consequently are dispersed e.

Some industries have become concentrated in particular regions without reference to either sources of raw materials or markets for products e. Still other industries are localized by their dependence upon other industries e. Marshall []vol. Others have pointed to the advantage offered by easily available services for replacement and repair of machinery; to the convenience to customers when the industry is concentrated in a single location Weberpp.

What is the relationship between specialization and trade and changing employment partners

For Adam Smith the specialization of labor is feasible only in an economy in which exchange of products between workers or firms is possible; it must be a market economy. The inconvenience of barter results, in turn, in the invention of money, and thus in the emergence of a price system. Since the extent of the division of labor is limited by the extent of the market, economic progress requires the development of improved means of transportation and the expansion of trade from a local basis to a world basis ibid.

Actually, trade and exchange preceded the appearance of the division of labor Biicherp. Exchange of surpluses among household producing-units in primitive communities is a common phenomenon, often unaccompanied by specialization of labor by households or even within the household.

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On the other hand, extensive division of labor within the household can develop without resulting in exchange ibid. However, division of labor within the household is the beginning of the development of separate occupations; and the development of labor specialization in occupations is the essential basis for the development of trade. For Smith, exchange performs the function of enabling the laborer to dispose of his surplus product and to obtain in turn an equivalent value of the surplus product of other laborers []vol.

There is no gain from trade; exchange simply makes possible the specialization of labor, which is the source of increased production. That exchange is not simply a device for disposing of surpluses but is mutually advantageous in a positive way is implicit in the principle of comparative advantage as applied to either international or interregional trade see Ohlinchapter 2. If, for example, the endowment of factors in region A gives it a comparative advantage in the production and export of agricultural products, and that in region B gives it a comparative advantage in the production and export of manufactured products, the effect of interregional trade will be to improve the terms of trade of agricultural products for manufactured products in A and those of manufactured products for agricultural products in B.

describe the relationship between specialisation and trade

The real income of the factors of production will increase in both regions. Although the price of the commodity is equal to its marginal utility for both buyer and seller, the exchange results in an increase in total utility for each of them.

More recent analysis can demonstrate the gains from trade more effectively by means of indifference curve analysis. American Economic Review Pages in Edward H. Stanley The Theory of Political Economy. American Economic Review 47, no. Quarterly Journal of Economics Marshall, Alfred Principles of Economics.

New York and London: Marx, Karl Capital: A Critique of Political Economy. The Process of Capitalist Production. The Process of Circulation of Capital. The Process of Capitalist Production as a Whole. Volume 1 was published in The manuscripts of Volumes 2 and 3 were written between and They were first published posthumously in German in and Workers will require less training to be an efficient worker.

Therefore this will lead to an increase in labour productivity and firms will be able to benefit from economies of scale lower average costs with increased output and increased efficiency. Examples of specialisation and division of labour In the process of producing cars, there will be a high degree of labour specialisation.

Specialization and Exchange

Some workers will design the cars Some will work on testing cars Some will work on marketing. Some workers will work on different sections of the assembly line. Their job may be highly specific such as putting on tyres e. Specialisation within economies Specialisation can also mean that individual countries can produce certain goods that they are best at producing and then exchange them with other countries.

Specialisation and division of labour | Economics Help

The theory of comparative advantage states countries should specialise in producing those goods where they have a lower opportunity cost relatively best at producing Specialisation requires trade.

Specialisation and trade mean that countries that produce no oil can consume oil products and countries with large reserves of raw materials can export them in exchange for other goods that they need. This helps reduce the problem of scarcity in individual countries and enables countries PPF to shift outwards.

describe the relationship between specialisation and trade

If there is increased trade there will also be increased competition.