Question

Define specialization and, with an example, show how specialization and voluntary exchange benefit both buyers and sellers in the economy.

Answer 1

Specialization can be defined as the area of expertise entrepreneurs focus on when they decide what business to put up to. For example, an entrepreneur could make a textile industry business. So, buyers would expect that they have high quality products that are made from good raw materials and skilled workers. During voluntary exchange, the buyer and seller would make a transaction. If the buyer is contented with the product, and the seller receives the agreed price, then it would benefit them both.