Question

Give the three reasons that explain why the division of labor increases an economy's level of production.

Short answer

The three reasons that explain why the division of labor increases an economy's level of production are:

1. Specialization
2. Economies of Scale
3. Flexible and Efficient Allocation.

Step-by-step solution

Step 1. Division of labor meaning

Division of labor is the way in which different workers divide required tasks to produce a good or service. It is the allocation of tasks to the individuals or organizations according to the skills and knowledge they possess.

Step 2. The reasons for increase in division of labor.

The three reasons that explain why the division of labor increases an economy's level of production are:

(i) Specialization

It allows workers to focus on the parts of the production process where they have an advantage. People have different skills, talents, and interests, so they will be better at some jobs than at others.

(ii) Economies of Scale

It means that for many goods as the level of production increases, the average cost of producing each individual unit declines.

(iii) Efficient Allocation

Division of labor enables workers to produce goods in fewer spans of time and of high quality.

The division and specialization of labor have been a force against the problem of scarcity.