Question

What are the advantages of using capital in the production process? What is meant by the term "division of labor"? What are the advantages of specialization in the use of human and material resources? Explain why exchange is the necessary consequence of specialization.

Answer 1

When we use capital in the production process it will increase the productivity. The rise in the volume of goods enhances economic growth

The concept of division of labour means assigning a particular type of work to an individual or to a group based on their ability and efficiency to do the work . The individual or a group will be given a particular task where they can use the skill in which they are specialized.

When there is specialization in the use of human resources rather than the quantity of the goods we will be producing goods that are superior in quality. The workers will be producing the same product over and over again quickly and easily . Certain material resources are used in the production of certain goods. Thus the specialization in the material resources will ultimately lead to productive efficiency.

Exchange is a necessary consequence of specialization because as a result of specialization there are chances that an economy will produce more of one commodity in relation with the other. So there will be excess of certain type of a good and there will be deficiency of other goods. So exchange is necessary in order to fill the gap .