The Division of Labor The DIVISION OF LABOUR is a system whereby workers concentrate on performing a few tasks and then

exchange their production for other goods and services. This is an example of specialization. ADVANTAGES OF SPECIALISATION / DIVISION OF LABOUR To the business: - Specialist workers become quicker at producing goods - Production becomes cheaper per good because of this - Production levels are increased - Each worker can concentrate on what they are good at and build up their expertise To the worker: - Higher pay for specialized work - Improved skills at that job. DISADVANTAGES OF SPECIALISATION / DIVISION OF LABOUR To the business: - Greater cost of training workers -Quality may suffer if workers become bored by the lack of variety in their jobs To the worker: - Boredom as they do the same job - Their quality and skills may suffer - May eventually be replaced by machinery OTHER TYPES OF SPECIALISATION REGIONAL

Certain areas have specialized in certain industrial production e.g. coal mining in Yorkshire, pottery in Stoke INTERNATIONAL Certain countries have advantages in producing certain goods. They may have natural resources or they may be able to produce goods more cheaply. e.g. Sri Lanka Tea, Japan electronics. They then trade these goods for those produced in other countries. Factors of production Factors of production are the resources of LAND, LABOUR, CAPITAL and ENTERPRISE used to produce goods and services. LAND Land is the natural resources on the planet. It includes space on the ground, hills, seas, oceans, air etc LABOUR Labor is the human input (workers, managers etc) into the production process. The UK has about 58 million people of which approximately 35 million are of working age. Each individual has a different level of skills, qualities and qualifications. This is known as there HUMAN CAPITAL. CAPITAL Man made physical goods used to produce other goods and services. Examples include machines, computers, tools, factories, roads etc. Increases in the level of capital are called INVESTMENT ENTERPRISE The entrepreneur provides the initial ideas. They risk their own resources in business ventures. They also organize the other 3 factors of production.

MARKET FAILURE Market failure is a concept within economic theory wherein the allocation of goods and services by a free market is not efficient. That is, there exists another outcome where market participants' overall gains from the new outcome outweigh their losses (even if some participants lose under the new arrangement). Market failures can be viewed as scenarios where individuals' pursuit of pure self-interest leads to results that are not efficient that can be improved upon from the societal point-of-view. A free market is a market without economic intervention and regulation by government except to enforce ownership ("property rights") and contracts. It is the opposite of a controlled market, where the government regulates how the means of production, goods, and services are used, priced, or distributed. Economic interventionism is an action taken by a government in a market economy or market-oriented mixed economy, beyond the basic regulation of fraud and enforcement of contracts, in an effort to affect its own economy. Regulation is "controlling human or societal behavior by rules or restrictions." Regulation can take many forms: legal restrictions promulgated by a government authority, selfregulation by an industry such as through a trade association, social regulation (e.g. norms), co-regulation and market regulation. One can consider regulation as actions of conduct imposing sanctions (such as a fine). A market economy is economy based on the power of division of labor in which the prices of goods and services are determined in a free price system set by supply and demand.