Division of Labor and Specialization Essential Questions: How can businesses and individuals make good economic decisions? How do the goals of consumers differ from the goals of producers?

Productivity Inputs – things used to make products Outputs – goods and services produced from inputs Businesses work to change inputs into outputs The relationship between inputs and outputs is called productivity – the amount of output per unit of input

Production Costs All people and producers of goods and services must consider how they will spend their time or how many units of a good or service to produce. The best way to do this is to consider the costs and benefits of each possibility. Production Costs: - Fixed Cost: money that must be paid no matter how many units are produced. Ex: you must pay the rent on your factory whether you produce 500 units or 0 units. - Variable Cost: The additional money (on top of fixed cost) that must be paid to produce. The amount changes as the number of units produced change. - Total Cost (TC): Fixed Cost (FC) + Variable Cost (VC). Businesses often focus on the Average Total Cost Total Cost divided by the number of units produced. - Marginal Cost: The additional money that must be paid in order to produce one more. Marginal Cost (MC) = TC producing two units – TC producing one unit

Cost-Benefit Analysis When you make decisions about how to spend your time and money, it is smart to consider costs and benefits as well. People should consider not only the monetary cost of a decision, but also time and activities given up. People should determine the benefits of each decision as well. An easy way to do this is to ask yourself how much someone would have to pay you to not make the purchase/activity. Good economic decision makers only choose options where the benefits outweigh the costs.

Types of Workers Labor Force – all the workers in a nation Blue Collar Workers – people who do manual labor in their jobs – named for the blue work shirts factory workers used to wear Examples: Mechanics, Assembly Line Operators White Collar Workers – people who work in a business environment (desk jobs) – named for the white collared shirts businessmen used to always wear Examples: Administrative Assistants, Bankers Skilled Worker – jobs that require special training, knowledge, and abilities beyond “on the job” training Examples: Teacher, Plumber, Surgeon, Pilot Unskilled Worker – jobs that don’t require special training, abilities, or knowledge Examples: Assembly Line Operator, Janitor, Receptionist

Division of Labor Invented by Adam Smith – the Father of Capitalism Breaks a job down into a series of tasks for maximum production (increases productivity) Allows workers to practice and perfect a particular set of tasks Specialization – the specific task and skills that one worker contributes to the Division of Labor

Technology in the Workplace Assembly Line – uses the division of labor and specialization; one person adds one or two things to a product as it moves down the line. At the end of the line, the product is complete. Factory – large industrial building or set of buildings where workers produce goods Innovation – creates new inventions and technologies used in business success; rewards businesses with higher profits Mass Production – low-skilled workers use machinery to make lots of products Automation – using more and more technology to make products, can be bad because it puts people out of jobs Robotics – using robots to make products