ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Diversification and specialization both are important for a business’ financial well-being. With specialization, a company can excel in a market and increase profits by gaining customer loyalty. With diversification, a company can continue to expand its market and improve its profits directly.

Detailed explanation-2: -Specialization Leads to Economies of Scale As labor is divided amongst workers, workers are able to focus on a few or even one task. The more they focus on one task, the more efficient they become at this task, which means that less time and less money is involved in producing a good.

Detailed explanation-3: -While diversification involves shifting the economic focus towards greater diversity in terms of products and services (income sources), specialization involves keeping the focus on the incremental improvement of a limited range of goods and services.

Detailed explanation-4: -Diversification helps to manage volatility and provide a more stable path for equitable growth and development. Successful diversification is all the more important now in the wake of slowing global growth and the imperative in many developing countries to increase the number and quality of jobs.