Cambridge International AS Level Economics
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This was compared to his estimate that each employee would be able to produce only a few dozen each day if they produced pins individually. Modern manufacturing processes are usually split up into a number of tasks. A typical example is in a garment factory where each operative produces one part of an item of clothing such as a shirt sleeve or button holes. This division of labour is usually quicker and cheaper than having one person complete each garment on their own. It also allows workers to become more specialised and can lead to an increase in productivity and an improvement in the quality of the finished product. In the United States the division of labour was taken a stage further in the 1920s when Henry Ford introduced conveyor belt production into the car industry. Ford’s method of car production provided the model for much of manufacturing production in the twentieth century with ‘Just in Time’ processes being widely applied in many types of business. With relevant planning, it is possible to keep production underway with minimal levels of parts or stock. Although the division of labour raises output, it often creates dissatisfaction among the workforce as they become deskilled and bored with the monotonous nature of their work. In modern developed economies the dehumanising impact of production techniques, such as using a conveyor belt and robots, has been acknowledged and procedures introduced to counteract boredom such as multi-skilling and moving workers around the production plant. KEY CONCEPT LINK
Scarcity and choice: Through specialisation and the division of labour, resources that are available can be used to increase what is being produced, so meeting more wants.
Resource allocation in different economic systems and issues of transition Economic structure
The term economic structure refers to the way in which an economy consists of various sectors. It is used to show KEY TERM
Economic structure: the way in which an economy is organised in terms of sectors.
the balance of economic activity, usually measured in terms of the value of total output, between these sectors. The following sectors are recognised: ■
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Primary sector: This consists of agriculture, fishing and activities such as mining and oil extraction. Secondary sector: This term is used to describe the wide range of manufacturing activities that are found in an economy. Typical examples are: food processing, textiles and clothing, iron and steel production, vehicle manufacturing, and electronics. Tertiary sector: This is the service sector and covers a range of diverse activities such as retailing, transport, logistics, banking, insurance and education. Quaternary sector: A relatively new term to denote the knowledge-based part of the economy, especially the provision of information. Typical examples are scientific research and product development, computing and ICT.
As economies develop their economic structure changes and there is a progression from primary to secondary to tertiary activities. In developed economies, the tertiary sector tends to be the principal employer. In the UK, for example, in 2012 around four out of every five people in employment were employed in the service sector. This is not the case in less developed economies. In Tanzania and Kenya, by way of contrast, similar proportions of workers are employed in the primary sector alone.
Systems of resource allocation The problem of scarcity, which in turn requires choices to be made, is one that is common to all economies, rich and poor. The choices that are made and which can realistically be made are determined by the economic system of a particular country. This term is used to describe the means or allocative mechanism by which its people, businesses and government make choices. Traditionally, economists have recognised three distinct types of economic system – these are the market economy, the command or planned economy and the mixed economy. Let us briefly consider each in turn. KEY TERMS
Economic system: the means by which choices are made in an economy. Market economy: one where most decisions are taken through market forces. Command or planned economy: one where resource allocation decisions are taken by a central body. Mixed economy: one where market forces and government, private and public sectors are involved in resource allocation decisions.