Producers, Trade, and Specialization

Producers and Consumers

  • Basic definitions:

    • Producers use resources to produce goods/services

      • For example, a textile (clothing) factory might use different fabrics, machines, and people to produce their good

      • A restaurant uses different ingredients and resources to produce their goo they serve to the public

    • Consumers consume, or use, the goods/services provided by the producer

  • Before goods/services can be distributed to households, they must be produced by someone, a business, or an organization

  • Important part of the economy

  • In the production process, producers combine natural, human, and capital resources

  • Because productive resources are limited, producers must choose which goods or services to produce

Specialization and Trade

  • Specialization is an important part of producing goods/services: different firms make different kinds of products and individual workers perform specific jobs within a company

  • Think about different examples of services/goods you see:

    • Clothing Stores

    • Grocery Stores

    • Car Services + Mechanics

    • Carpenters, bakers, artists

    • Pediatricians and doctors!

    • These examples, and many more, are all examples of people or companies specializing in different functions

  • This is called division of labor: an example is a car assembly line! Different people assembly different parts

  • Example: Chipotle!! When you go to Chipotle, each worker adds a different ingredient/food to your bowl/burrito

Goods and services are exchanged between people so people get the services/goods they want and desire (trade)

Advantages of Specialization in Trade

  • Becoming good at different things enhances (improves) competitiveness

  • Workers become an expert at what they do, improving quality

  • Increases efficiency and more products can be produced quicker (increase competitiveness for business or person in the economy)

  • Makes it possible to develop tools for specific workers

  • When an economy can specialize in production, it benefits from international trade

  • For example, if a country can produce bananas at a lower cost than oranges, it can choose to specialize and dedicate its resources to producing bananas, using some of the bananas to trade for oranges!

Think about examples of these concepts in your daily life!


Check your answers!

Quiz Answers (out of 6):