The Development of Money

The barter system worked well during the early stages of economic activity but not with

disadvantages; however, human-beings learnt to solve problems and continue to do so even today

and thereby make trading easier by introducing money, a viable alternative to the barter system.

Money helped to reduced largely, some of the problems encountered in the barter system. Some

of these were:

 indivisibility

 Storage these will be explained in class

 double coincidence o wants

 a standard exchange rate

The use of money in trading opens the door for economic growth and development of societies.

Indirect Production

When a family attempt to satisfy its needs and wants, the needs and wants of another family is also been

satisfied. They created surplus from which exchanged were actually involved in indirect production.

Satisfying needs and wants

Needs are crucial to one’s survival, while wants merely express desire for something. As society become

more complex, and as human-beings take on more sophisticated lifestyles, their needs and wants increase.
A variety of needs and wants are being produced by workers in various organizations who are working

together t meet the goals that have been set. Different methods are been adopted by organizations an one

such method is Specialization which has been bought about by Division of Labour.

SPECIALIZATION/DIVISION OF LABOUR

This is the division of economic activity into manageable portions and assigning each portion to a specific

person. Each person must possess the knowledge, skill, competence, and experience to handle the task

assigned. If the business is in the production of motor cars, then the workers, would work on an assembly

line. In this process, one worker selects and completes the task assigned then passes it along the line to the

next person until the last person on the line adds the final part to the product.

Examples: (put into PP)

 In the production of cars, some workers may concentrate on just making gear sticks while others

concentrate on the other aspects of the car. The parts are then assembled, thus producing a whole

car.

In a hairdressing parlor, one person perms the hair, other shampoos and sets, other cuts, and another

removes setters and styles the hair. Now, think of other areas of specialization or division of labor on your

own.

Limitations of Specialization
 1. The size of the market –if consumers’ demand for the product is were small, it would not benefit

the producers to engage in large-scale production because there would not be enough sales to

expand production.

2. The nature of the product – some goods and services do not lend themselves to large-scale

production that required division of labour but still require specialist skills. For example, in the

case of dental services, a dental nurse cannot perform dental operation.

3. Capital equipment – some businesses cannot afford the kind of capital, equipment and machinery

that would enhance production (may be too small).

Advantages of specialization/division of labour

1 A worker needs only be trained in a limited way, one or two processes – thus reduce a lot of training

time.

2 Because workers repeat specific skills many times in the course of a production process, they develop

high levels of competency, and thus work quickly and more efficiently and proficiently.

3 Productivity increased because workers become more proficient at the tasks assigned. In ‘gear sticks’-

example given earlier, workers become very proficient, and thus many goods gear sticks can be made.

4 The unit cost of production is reduced thus getting the goods to the consumer at a lower price, and

providing the opportunity for the organization to generate greater profits through high volumes of

purchase by consumers.

5 There is a greater opportunity to use machines and automated methods to accomplish the tasks.

Disadvantages of specialization/division of labour

1. The repetitive nature of the limited tasks carried out by workers could lead to boredom, and lack of

attention to the tasks, and sometimes mistakes are made.

2. Other skills possessed by workers are not utilized, thus limiting the creativity of the workers

therefore the workers do not get the chance to show their creative abilities in the making of a

product.
3. If a key worker is absent, then the assembly line could be greatly interrupted, thus interfering with

production targets.

4. It might be difficult to upgrade the machinery because those in use are usually built to specifications

or certain standards to meet the specific needs of the tasks being under taken. It could prove very

costly to the organization to make an adjustment at that time.

5. Some firms are either too small or strapped for capital to afford to put in place the kind of capital

equipment and machinery that can enhance production.

Business and the Business Environment

A business or business unit involves individuals, companies or corporations who engage in industrial

or commercial activity with a view to make profit.

However, there are non-profit making organizations such as government-owned school, service clubs

and churches.

Today’s Business Environment

Now-a-days we are bombarded with businesses all around us, from sidewalk venders to multinational

corporations; which are all established to provide all types of products that are demanded by people

far and wide. However, lately we have been hearing about downsizing and re-engineering in the

business environment.

Downsizing

This means the scaling down of business activities by an organization or by a number of

organizations to achieve greater efficiency of operation. Efficiency means that workers and systems
 are achieving the goals of an organization by working so well that every little waste of resources

occurs. This helps to bring about a high level of profit.

Re-engineering

This has to do with the reorganization of, or the retooling of the operations of a business to achieve

greater efficiency.

Example of achieving efficiency:

 Business minimize waste

 Remove unnecessary steps in completing a process or task

 Make use of machinery

 Use modern technological means and method – computer

Effects of changes

There are many effects, but the major one is the scarcity of jobs; more and more people are finding it

difficult to obtain jobs when the firms for which they work downsize or re-engineer. As a result many

people have become self-employed. That is why is important for us to know about businesses and how

they function.

Functions of a Business

The major functions of a business are:

 Production of goods and services

 Accounting and Finance

 Marketing and sales

 Personnel
Production Function of a Business

a) Production of goods involves the conversion of raw materials or input materials into output of

saleable products needed by customers to satisfy their needs and wants. However, products must

be:

 made to the highest quality and standards required

 produced in the quantity required, and

 made available at an affordable cost to consumers

b) Many industries adapted to a method of mass production; which is producing goods in very large

quantities by using automated methods or means. Features of mass production are:

 standardization

 mechanization

 division of labour and specialization

Mass Production helps to lower unit costs as a result of economics of scale; low costs means that more

goods will be available in the marketplace at lower prices. Lower price means that a larger percentage of

the population will be able to buy the goods, and thus make it possible for businesses to enjoy higher

profits margin.