Specialization

 Specialization
   Division of labor occurs when workers specialize in jobs in which they are most capable. Individuals can specialize in specific fields such as medicine or law. Firms and nations specialize when they produce only one or a few products.

  Of course, when one specializes in an area, there are advantages and disadvantages. Let's look into it now. First of all, specialization enables workers to be far more productive than if they were to have only a shallow understanding and knowledge of all tasks. Time is also saved because workers are not constantly changing tasks, moving around from place to place or using different equipment, machinery or tools. Division of labor makes it cost effective to provide workers with specialist tools. Lastly, specialization enlarges the market size due to the lower costs of production resulting from economies of scale.

  For instance, if a person specializes in making bowls only, rather than making mugs and cups, it will cause a job to become boring and monotonous over time. Due to the repetitive nature of certain jobs, the workers may find their jobs become dull, uninteresting and unchallenging. The workers may also feel alienated from one another. Besides, because of the unchallenging nature of the job, the workers have no room for self-expression and therefore can become unmotivated. Specialization can also cause immobility of labor. The workers, being specialists, will have difficulty in looking for other jobs because their specialized skills have made it very difficult for them to adapt to different conditions.

Here are the summarized characteristics, advantages and disadvantages of free market economy and planned economy : 

	Free Market Economy	Planned Economy
1)     Characteristics	. Existence of consumer sovereignty	. No consumer sovereignty
	. Private ownership	. Public ownership
	. The price mechanism operates freely	. Equality of income and wealth
	. Free enterprise	. No freedom of enterprise
	. Competition	. A high and stable level of employment
2)     Advantages	. Efficient allocation of resources	. Attainment of full employment
	. Wider range of choices	. Social justice
	. Decentralized decision making	. Economic stability
3)     Disadvantages	. An unequal distribution of income	. Misallocation of resources
	. Demerit goods	. The lack of choice
	. An underproduction of merit goods	. Costly administration
	. Lack of public goods	. Loss of consumer sovereignty
	. Competition may be wasteful	. The time lag in the implementation of plans

Mixed Economy
   In a mixed economy, both public and private sectors work hand-in-hand to ensure the economic growth of a country. The role of public sector is to complement the private sector by providing the infrastructure to encourage effective economic activity. Next, the government will try to reduce income inequality by imposing a progressive tax system where higher income earners are taxed more than lower income earners. The government will also control the existence of monopolies and regulate their power. In a public sector, there's little/ no choice. The government plans and allocates accordingly whereas in private sector, the choice of goods and services are made with the price mechanism.

   The government will only intervene in certain industries where :

a) The initial/ fixed costs are too high.

b) It is not profitable for the private sectors.

c) It involves merit goods.

d) There is a need to avoid duplication and wastage of scarce resources.

e) Strategic or military reasons are involved.

f) Humanitarian reasons are involved.

Reflection on basic economic problem

     All goods and services that have a price are relatively scarce. It may seem that, in your city, cars are not scarce as there are a great number of them around. However, it is certain that not everyone who would like a car in your area has one, usually because they cannot afford to buy a car. The amount of money they have, and the price of the car, usually determines the ability for people to purchase a car. So, scarcity is a condition that exists because there is an insufficient quantity of resources ( for example, money ) available to produce all the goods and services desired by individuals. In other words, we lack the income and ability to produce everything required to satisfy everybody's wants. 

   Since scarce resources and infinite wants conflict with each other, all consumers, firms, and governments must make choices and compromises on a daily basis. Consider for a moment the millions of decisions made by people everyday. For instance, all of them have to make a choice on when to travel and whether they should take the bus, walk, train, cycle or even work from home. Many of these decisions become habitual,  meaning we make the same choices every time. And yet, on most days, people get to work on time and they get home too ! :P This is a remarkable achievement, and for it to be possible, the economy must provide both the resources and the options for it to happen. 

   For every choice, there will be an opportunity cost, which is the next best thing you must forgo. In other words, it is the second best that you must sacrifice in order to have your best or first choice. Opportunity cost is the true cost of any choice made between alternatives. For example, if you decide to buy a DVD for $20 rather than have a meal out, then the opportunity cost of the DVD is the meal out that you go without. It is not the $20, as opportunity cost is never expressed in monetary terms.