SS 1 Commerce First Term Week 7

Topic: Specialization and Exchange


  1. Meaning of Specialization
  2. Types of Specialization
  3. Advantages of Division of Labor and Specialization
  4. Disadvantages of Division of Labor and Specialization
  5. Meaning of Exchange
  6. Inter relationship Between Among Production, Specialization and Exchange.

Specialization: Specialization is defined as the concentration of the productive efforts of an individual, a firm or a country in a given aspect of economic activity or on a particular line of production in which it has the greatest advantage over others. It is the act of pursuing a particular line of work where a person is more effective over others.

Specialization is also the permanent engagement of people in one aspect of the production process for better operation.

Specialization occurs as a result of division of labor. It is the performance of a single job or economic activity in which an individual, firm or a country has a comparative advantage.

 Types of Specialization

  1. Specialization by Products: This is the type of specialization where an individual, firm or Government concentrates their production on a particular type of product or commodity. For instance a firm who concentrates on the production of shoes alone.
  2. Specialization by Sex: This is the kind of specialization where some certain kind of job are exclusively for either male or female as dictated by either custom or tradition. For instance the driving of trailers is done by men while the making of hair is done by female.
  3. Geographical or territorial specialization: This is the kind of specialization where people living in a particular geographical or territory specializes in producing particular products because of the nature of the weather and natural resources in the area, for instance; the availability of petroleum in Niger delta makes them to specialize in drilling of petroleum.
  4. Specialization by Process: This the means by which a production process is divided into different stages and each worker or firm now concentrate on only aspect of the production. In a bakery for instance; a person may specialize in the mixing of flour.

Advantages of Division of Labor

The following are the advantages of division of labor

  1. Division of labor helps to increase production: This is because the various experts along the production process work together to boost greater production.
  2. It creates employment opportunities: It helps in the employment of experts to handle different part as a lot of people will be needed in carrying out different function.
  3. It leads to specialization: It makes a person to be a specialist in the area of job a worker does.
  4. It brings about large scale of production: Division of labor and specialization lead to large production of goods or commodities.
  5. It brings about development of technology: Through the use of Machinery, different technology is developed to further facilitate production.
  6. Time saving: It helps to save time that would have been wasted in moving from one operation to another.
  7. Production of standard goods: Division of labor and specialization helps to produce standard goods which possess the same specification like colors, shape and size etc.
  8. Development of greater skill: It helps each worker to be developed in their skill because of constant repetition of the same work.

Disadvantages of Division of Labor

  1. Problem of mobility of labor: Under division of labor a worker stays on a particular and single job for a long time and this can make it difficult for him to cope with other kind of job.
  2. It leads to monotony and repetition: A worker does the same Kind of job everyday and later can get bored and tired; this can make him lost interest in the job.
  3. Decline in craftsmanship: As a result of the use of machines in division of labor, people tend to be lazy and not use their skill in production but dependent on machine.
  4. Problems from increased inter-dependence: Division of labor causes workers to be dependent on one another, the absent of a person can lead to no production.


Exchange is the act of giving out value in order to have something of value in return. It means to give up (something) for something else.

Exchange arises as a result of excess production of goods and services, in the olden days, it was barter, where goods are exchange for goods but nowadays goods are exchange for money.

Inter-relationships among production, specialization and exchange

The relationships between these concepts cannot be over emphasizes

Exchange is only possible because of production and specialization, production which is the creation of utility in the aspect of goods and services can be enhance through the breaking down of jobs into different segment, division of labor and specialization therefore leads to increase or excess in production, this excess therefore needs to be exchange for what others have also produced, for instance a producer of shoes can exchange shoes for clothes through the means of money.. Specialization facilitates production and trade.

 Test and Exercise

  1. The exchange of goods for goods is called (a) money (b) barter (c) specialization (d) all of the above. ans (b)
  2. The type of specialization where individual or firm concentrate their production on one type of product is called (a) specialization by process (b) specialization by sex (c) specialization by product (d) geographical or territorial specialization. ans (c)
  3. One disadvantage of division of labor is (a) increase in production (c) leads to specialization (c) it saves time (d) decline in craftsmanship. ans (d)
  4. The situation where an individual, firm or government concentrates on the production of a particular line of goods and services where they have comparative advantage over others is (a) exchange (b) division of labor (c) specialization (d) production. ans (c)
  5. All of these are disadvantages of division of labor except (a) large scale production (b) mobility of labor (c) monotony or repetition (d) decline in craftsmanship. ans (a)