Title: Benefits of Specialization
Headings: Benefits of Specialization
Benefits of Specialization
Specialization leads to greater economic efficiency and consumer benefits.
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Content: Consumer benefits: Specialization means that the opportunity cost of production is lower, which means that globally more goods are produced and prices are lower. Consumers benefit from these lower prices and greater quantity of goods. Opportunities for competitive sectors: Firms gain access to the whole world market, which allows them to grow bigger and to benefit further from economies of scale. Gains from trade: Suppose that Britain and Portugal each produce wine and cloth. Britain has a comparative advantage in cloth and Portugal in wine . By specializing and then trading, Britain can get a unit of wine for only 100 units of labor by trading cloth for labor instead of taking 110 units of labor to produce the wine itself (assuming the price of Cloth to Wine is 1). Similarly, Portugal can specialize in wine and get a unit of cloth for only 80 units of labor by trading, instead of the 90 units of labor it would take to produce the cloth domestically.