INTER-RELATIONSHIP AMONG PRODUCTION, SPECIALIZATION & EXCHANGE
Happy New Week
Everyone, This is a Beautiful Week and Thank God we are Alive. Let's Get
Started!!!.
Exchange is as a result of
Specialization and Production. They are related in the sense that Production is
enhanced by the broken down processes that are performed by different people.
Division of Labor and Specialization creates room for Mass Production.
Since individuals are not
capable of producing all his requirements, the need for exchange arises.
HISTORY OF
DIVISION OF LABOR
One of the Forefathers of
Economics, Adam Smith who further explained the Theory of Division of Labor in
1776, in his book “The Wealth of Nations.” Adam Smith visited a place where
Pins were made and found out that Pin-Making involved eighteen different
processes at that time.
He also found out that one
man was coordinating all the processes of Pin-Making alone; as a result of this
rigorous and slow process he was producing 20 pins per day. Adam Smith came to a
conclusion that if these Eighteen Pin-Making Processes were handled by
different people, more pins will be produced.
The idea of Division of Labor thought out by Smith was applied as a result,
48,000 Pins were
