SSEF3 Explain how specialization and voluntary exchange influence buyers and sellers.
a. Explain how and why individuals and businesses specialize, including division of labor.
Specialization is can be observed when individuals or businesses concentrate on a single activity or an area of expertise when producing a good or service. In economics, specialization is important because it boosts the overall productivity of a business or country. For example, a firm might use specialization by creating division of labor in the production of a good or service. An example of division of labor at a fast food restaurant might be when one employee takes drive-thru orders while another employee makes the food. Both employees get better at their tasks through repetition and can do the task more quickly with fewer errors. The fast food restaurant which has chosen to specialize in convenient, ready-made meals would probably not try to offer gourmet, fine dining at the same time and lets other restaurants specialize in this type of cuisine.
Specialization can also be observed when students choose to pursue a particular major in college. The farther into their college years, the more specialized their classes become. A business major may start out taking courses in economics, marketing, and management, but ultimately focus in the field of accounting and become an accountant. The student with specialized training in accounting will often be able to perform accounting tasks more quickly and with fewer errors than someone trained in another field. The accountant can then voluntarily exchange his or her labor for payment and use the money earned to purchase the goods and services produced by individuals and businesses specializing in other areas.
Explain that both parties gain as a result of voluntary, non-fraudulent exchange.
Voluntary exchange occurs when two economic actors willingly trade one item for another because the value of the item they are receiving is greater at the time than the item they are giving up to receive it. While voluntary exchange can happen through barter, trading one good or service for another good or service, it is usually facilitated through money. Buyers can be household consumers, firms or governments while sellers can also be household consumers, firms or governments.
Voluntary exchange occurs when two economic actors willingly trade one item for another because the value of the item they are receiving is greater at the time than the item they are giving up to receive it. While voluntary exchange can happen through barter, trading one good or service for another good or service, it is usually facilitated through money. Buyers can be household consumers, firms or governments while sellers can also be household consumers, firms or governments.