specialisation, IAL ECONOMICS THEME ONE,UNIT ONE,MODEL ANSWER

Specialisation Specialisation occurs when individuals, firms, or countries concentrate on producing a limited range of goods or services in which they have a comparative advantage. It allows resources to be used more efficiently.Benefits include higher productivity, lower costs, greater output, trade gains, and improved living standards For example, a country like Ghana specialising in cocoa or Bangladesh specialising in textiles uses its resources where it is most efficient. Firms like Toyota specialising in car manufacturing can achieve economies of scale • Increased productivity and efficiency: When workers or firms specialise, they become more skilled through repetition, reducing average costs and increasing output. • Economies of scale: Specialisation allows firms to produce on a larger scale, lowering unit costs and improving competitiveness. • Time saving and innovation: Workers focus on specific tasks, which saves time and encourages technological improvements. • Trade and higher living standards: Countries specialising in goods where they have a comparative advantage can trade for other goods, leading to a more efficient global allocation of resources and higher GDP. However, specialisation also has limitations: • Overdependence: If demand falls for the specialised product (e.g., cocoa), the economy may suffer unemployment and income loss. • Structural unemployment: Skills become too narrow; if technology changes or industries decline, workers may struggle to adapt. • Resource depletion: Over-specialisation can overexploit natural resources or cause regional imbalance. • Trade risk: Countries relying on a few exports are vulnerable to world price changes. Hence, while specialisation improves efficiency and output, it also increases risk and dependency, especially for developing economies. Overall, specialisation brings significant efficiency gains, lower costs, and improved living standards if diversification and adaptability are maintained. In the long run, its benefits depend on whether economies can manage the risks of overdependence and maintain flexibility in production.