1.1.5. Specialisation NAME

1.1.5. Specialisation NAME:

Economics: the birth of a subject A brief timeline:

Circa 7 million years ago: The first hominids begin to appear Circa 4 million years ago: Some hominids starts to walk upright Circa 2.5 million years ago: Some hominids (Homo habilis) start to make crude stone tools and perhaps start to trade them within their group (the start of Economics?!) Circa 1.5 million years ago: Hominids (Homo erectus) start to use fire and to make more complex tools Circa 130,000 years ago: Modern humans (Homo sapiens) start to appear. They were foragers who lived in small groups of relatives. Violence between groups was the norm. Circa 35,000 years ago Some groups adopted a more settled lifestyle becoming hunter-gatherers. Some trade between groups. Homo sapiens was the only hominid species to develop:  trade with strangers/non-relatives  a division of labour This may have given Homo sapiens an advantage over other hominids such as the Neanderthals Circa 12,000 years ago Permanent settlements develop – hunter-gatherers became farmers – agriculture increased food supply and made towns and cities possible. This was made possible by:  trade with strangers/non-relatives  a division of labour 250 years ago The wealth creation capabilities of humans suddenly exploded delivering unsurpassed standards of living and life expectancy

Adam Smith (1723-1790) witnessed the start of the process of rapid wealth creation from the mid-18th century. In 1776, he published The Wealth of Nations. Smith observed that trade and specialisation go together: 1. people, through their labour, turn raw materials into useful products which others want and are prepared to pay for – trade makes an exchange possible

2. people get richer if the number of useful products per person per hour increases (i.e. increasing labour productivity makes us better off)

3. the key to increasing labour productivity is the division of labour and specialisation

Tasks 1. Explain why the possibility of trading a product might provide an incentive to produce (4 marks)

2. Explain how increasing productivity should make the producer better off (4 marks)

3. Explain how the division of labour should increase productivity (4 marks)

HINTS: look at how many marks there are per question and write in full sentences. The word/phrases in bold should be defined.

Don’t forget to: PRINT OUT THE NEXT SLIDES