Business Studies Paper 2 Questions and Answers - Form 3 End Term 1 Exams 2021

1.  
   1. Explain five features that differentiate a public corporation from a private limited company form of a business unit (10mks)
   2. Explain five reasons why citizens may experience low standards of living despite improvement in the per capita income (10mks)
2.  
   1. Discuss five reasons why a manufacturer may decide to sell directly to consumers (10mks)
   2. Explain five benefits that would accrue to a country as a result of delocalization (10mks)
3.  
   1. Explain five circumstances under which the nature of goods would influence the choice of the means of transport (10mks)
   2. Using a well labeled diagram, explain the flow of income in a two sector economy (10mks)
4.  
   1. Discuss five methods that can be used by the government to solve unemployment in the country today(10mks)
   2. Explain five roles of insurance in the developmentof the economy (10mks)
5.  
   1. Explain five measures put in place by the government to bring order in road transport sector in Kenya today (10mks)
   2. Discuss five ways in which communication enhances trading activities (10mks)
6.  
   1. Explain five factors that influence choice of distribution channel (10mks)
   2. Explain five factors that constitute a healthy external environment for business (10mks)

Marking Scheme

1.  
   1. Explain five features that differentiate a public corporation from a private limited company form of a business unit (10mks)
      

      Public corporation	Private limited
      Initial capital is usually provided by the government	Initial capital comes from the share holders
      Established through legislation by an act of parliament	Established by promoters according to company’s act
      Managed by a board of directors appointed by parliament	Managed by one or two directors elected by shareholders
      Profits are issued to dividends and the government to the members	Profits are distributed to share holders in dividends
      Not- profit motivated	Established to earn profits

   2. Explain five reasons why citizens may experience low standards of living despite improvement in the per capita income (10mks)
      1. Statistical data problems- national income may be inaccurate hence wrong per capita income
      2. Income distribution-when the income is in the hands of a few people, we cannot say that welfare has improved.
      3. Nature of products- when products are not meant to satisfy immediate wants of citizens per capita income may not bring economic welfare
      4. change in money value-when money has been devalued, per capita increase will not bring peoples’ welfare
      5. Social cost- some people may migrate from rural to urban areas. Straing family relationship / increase in industrial growth may cause pollution which may make those citizens worse than before
      6. Difficult in measuring welfare- peoples aspiration and wants keeps on changing hence per capita income is not the best way to measure welfare
      7. Change in population- if a static population is assumed higher economic welfare will be the result
2.  
   1. Discuss five reasons why a manufacturer may decide to sell directly to consumers (10mks)
      1. Concentration of customers in one place- this makes the manufacturer to reach them easily
      2. Customers being near the market- where customers are near the market, manufacturers may decide to sell directly without other middle men
      3. Requirement by the government – some legal constraints may force the manufacturer to sell his or her goods directly to consumers
      4. In case of ordered goods – where goods produced have been ordered by customers, the manufacturers will sell them directly
      5. Where production follows customers specification
      6. Where products are fragile – this will need a lot of careful handling hence will be sold directly
   2. Explain five benefits that would accrue to a country as a result of delocalization (10mks)
      1. Reduced income disparities- people have access to jobs and income
      2. Better anxilliary services- rural areas develop
      3. Increased job opportunities – this leads to better living standards
      4. Increased use of locally available resources- this would utilize idle resources.
      5. Reduced rural- urban migration – this will reduce pressure in urban areas
      6. Balanced regional development- this is because firms are spread throughout the country
      7. Technology skills transfer leading to increased productivity
      8. Improved development of social amenities – this brings welfare in rural arears
      9. Provide market for raw materials in rural areas
3.  
   1. Explain five circumstances under which the nature of goods would influence the choice of the means of transport (10mks)
      1. Some goods are perishable in nature- this will therefore demand a faster means
      2. Some goods are fragile –a smooth mean will therefore have to be selected.
      3. Some goods are of high value- this will call for a very secure mean
      4. Some goods are bulky – this will demand the appropriate mean such as water transport
      5. If goods are irregular in shape- an appropriate mean have to be selected
      6. When goods are liquid or gas – this will call for pipeline transport
   2. Using a well labeled diagram, explain the flow of income in a two sector economy (10mks)
      
      A-households provide firms with factors of production
      B-Firm provide households with goods and services
      C- Firms provide households with income for factors of production
      D- Households provide firms with income after buying goods and services (8mks)
      Households (1mk)
      Firms (1mk)
4.  
   1. Discuss five methods that can be used by the government to solve unemployment in the country today(10mks)
      1. Increasing government expenditure – this will increase projects creating employment opportunities
      2. Encouraging capital intensive methods- this will create employment as the machines used will be replaced.
      3. Diversification of economic activities – this will create alternative opportunities for the unemployed
      4. Adopting a relevant education system – this will equip people with appropriate skills
      5. Encouraging use of local resources – it will help to create self –employment
      6. Population control – this will ensure a large ……………..of people is employed
      7. Adopting a relevant technology – it will open up many sectors for economy employment.
   2. Explain five roles of insurance in the development of the economy (10mks)
      1. Creating confidence in investors – this will therefore make them take risk and go on renting in investment
      2. Creation of employment – insurance companies create employment to individuals
      3. Mobilizing savings – this savings is then borrowed by the business community to start and expand business
      4. Compensation when loss is suffered – this enables people to go on with their business
      5. Educate others on matters pertaining insurance – this help people to learn more of insurance related issues
         (5 x 2 = 10mks)
5.  
   1. Explain five measures put in place by the government to bring order in road transport sector in Kenya today (10mks)
      1. Speed governors – This is to check on overspeeding which would otherwise cause accidents
      2. Use of alcohol blows – to detect and prevent driving of vehicles by drunk drivers
      3. Certificate of good conduct – carried out to ensurethose in road transport are of good conduct especially drivers and touts.
      4. Inspection of vehicles – to make sure that only the road worthy vehicles are driven
      5. Carrying capacity – this is determined to avoid road damage and accidents
      6. Vetting of drivers – to ensure that they are worth in driving sector
      7. All the PSVs vehicles have the yellow lines- this for identification
      8. All PSV vehicles to join SACCOs
         (5x2=10mks)
   2. Discuss five ways in which communication enhances trading activities (10mks)
      1. Enable giving and receiving of information- this is between various parties such as a firm and outsiders
      2. Enhancing public relations- this enhace the firms to create a positive image to the public
      3. Helps Cordination of departments –enables good linkage of activities in all departments
      4. Ways of giving reassurance – sometimes the seniors may appreciate their juniors
      5. Confirmation of arrangements –arrangements on meeting and conferences can easily be confirmed
      6. For giving instructions – Management can get work done by giving procedure and orders
      7. Giving feedback
      8. A way of influencing and starting action
      9. Enhance clarification of issues
         (5x2=10mks)
6.  
   1. Explain five factors that influence choice of distribution channel (10mks)
      1. Nature of goods –where goods are easily perishable, short channels are applied
      2. Nature of market – consumers spread over a large area may need a larger channel
      3. Resources and size of the firm – the size of the firm determine the size of its market hence the channel to be used
      4. Role of intermediaries- Middle men perform different roles and will therefore determine the channel used.
      5. Government policy- various regulations may influence selection of the channel of distribution eg the government may demand sale of goods directly to consumers
      6. Competitors – a firm will select a channel that will compete favorably with the competitor
      7. Marketing risks – where manufacturer wants to avoid cost of distribution, they may use middlemen.
   2. Explain five factors that constitute a healthy external environment for business (10mks)
      1. Political stability- this will create a conducive environment for business to thrive
      2. Favorable laws- this will encourage people to engage in business
      3. Reliable supply of raw materials –this will ensure proper growth and development of business
      4. Fair competition – this will enable the business to cope
      5. favorable physical factors- this will encourage business in such an area as workers will be attracted in that region
      6. Availability of market- this will create buyers for the business goods hence expansion and continuity
      7. Advanced technology – this will make the daily activities efficient