Cambridge International as and a level Economics Ebook

normative statements
, for example, by adding:
■
… and this 
should
be beneficial for the environment.
■
… and therefore the government of the Republic of Maldives
 
should
do everything it can to help promote this industry.
■
… and this 
should
reduce traff ic congestion.
Normative statement: 
one that is subjective about what 
should happen.
KEY TERM
Positive statements are particularly important in AS and 
A Level Economics. Th
ey are widely used to describe 
something that can be measured, such as the output 
of a fi rm or the rate of unemployment in the economy. 
Another use is in the construction and explanation of 
theories and concepts that have been developed over the 
years to explain how consumers, fi rms and governments 
operate. Normative statements are less certain, yet form 
the basis of policy-making by fi rms and governments in 
attempting to solve economic problems. While both types 
of statement are distinctive, they invariably work together 
since the normative view is usually based on some positive 
conceptual basis.
Specialisation and exchange
One of the ways in which more goods and services can 
be produced in the economy is through the process of 
specialisation
. Th
is refers to a situation where individuals 
and fi rms, regions and nations concentrate on producing 
some goods and services rather than others. Th
is can be 
clearly illustrated at the individual level. Within the family 
there may be some specialisation in the performance of 
household tasks, with one person doing the ironing and 
gardening while another does the shopping and cooking. 
In the workplace, of course, the fact that some people 
are labourers or lorry drivers while others have offi
ce 
jobs is also a refl ection of specialisation. At this level, 
specialisation allows individuals to concentrate upon what 
they are best at, meaning more goods and services will be 
produced. With specialisation, however, although more is 
produced, no one is self-suffi
cient. It becomes necessary 
to exchange or trade goods and services. As an individual 
specialises, they will produce a surplus beyond their needs, 
which they can exchange for the surpluses of others.
With the expansion of trade and the development of 
markets
, the benefi ts of regional and national specialisation 
became apparent. Surpluses produced by regions and 
countries were bought and sold, allowing world living 
standards to rise. Just as individuals concentrated on what 
they were best at, so did regions and countries.
Market: 
where buyers and sellers get together to trade.
KEY TERM
Specialisation has clearly resulted in a massive expansion 
in world living standards, but there are dangers too. 
Given the pace of technological change in modern 
society, there is always the possibility that the specialist 
skills and accumulated experience that any individual 
has acquired may become redundant as the economy 
develops. Individuals need to be fl exible and multi-skilled 
and to be able to move between occupations. At regional 
and national levels, changes in consumers’ wants can 
sometimes mean that the goods and services produced 
in a region or country are no longer required in the same 
quantity, so unemployment can result. Policies then 
have to be adopted to deal with the economic and social 
problems that will arise.