Business Paper 2 Questions and Answers - Form 3 End Term 1 Exams 2022

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INSTRUCTIONS: Answer any five questions

    1. Explain FIVE types of unemployment (10 mks)
    2. Describe FIVE channels of distribution that may be followed by imported manufactured goods (10 mks)
    1. Explain five ways in which the government may encourage delocalization of firms. (10 marks)
    2. In the recent past, many small businesses in Kenya have expanded and grown into large enterprises. Explain five causes of business success in Kenya. (10 marks)
    1. The diagram below shows a shift of the supply curve of a commodity from S1S1 to S2S2. Explain five factors that would have caused the shift. (10 marks)
    2. Ramji operates a large hardware business in a town in Kenya. Apart from motor vehicle insurance policies, highlight giving reasons, five insurance policies that may be beneficial for this business. (10 marks)
    1. Explain five limitations of using posters as a medium of product promotion (10mks)
    2. Explain five circumstances under which a partnership could be dissolved (10mks)
    1. Outline five differences between land and labour as a factor of production. (10 marks)
    2. Outline five uses of National income statistics to a country. (10 marks)
    1. Explain five factors that a business may consider when choosing an office layout. (10 marks)
    2. Explain five effects of a declining populating to an economy. (10 mks)


    1. Types of unemployment
      1. Seasonal unemployment – caused by seasonal variations (peak/off – peak season)
      2. Frictional unemployment – When people loose jobs and go looking for new ones
      3. Structural unemployment – caused by changes in methods of production or decrease in demand of goods and services
      4. Cyclical unemployment – occurs repeatedly at similar times
        (Boon /recession). Also called demand deficient /General unemployment
      5. Real wage/Voluntary unemployment – occurs when job seekers are not willing take up jobs at the prevailing wage rates
      6. Involuntary/open unemployment – occurs when peoples are willing to work at the existing wage rate but can’t find the jobs
      7. Disguised/Hidden unemployment – Occurs w hen the number of people unemployed exceeds the number which is required for the job.
      8. Residual unemployment – Affects people who are physically & mentally challenged
      9. Erratic /Casual unemployment - Affects certain sectors of the economy like construction where demands for labour is erratic and not regular
        Mention 1mk otherwise 2 mks x 5 = 10mks
    2. Channels of distribution of imported manufactured goods.
      • Foreign Manufacturer → Agents → Wholesaler → Retailer → Local Consumer.
      • Foreign Manufacturer → Wholesaler → Retailer → Local Consumer.
      • Foreign Manufacturer → Local Consumer.
      • Foreign Manufacturer → Manufacturer’s Representative → Wholesaler → Retailer → Local Consumer.
      • Foreign Manufacturer → Wholesaler → Local Consumer.
      • Foreign Manufacturer → Retailer → Local Consumer
        NB. Candidate should mention Foreign Manufacturer and Local Consumer
        5 x 2= 10mks
    1. Ways in which the government may encourage delocalization of firms.
      1. Infrastructure- The government may provide basic infrastructure such as water, electricity, roads and communication.
      2. Financial assistance- The government may provide low interest/ financial assistance to investors who adhere to delocalization policy.
      3. The government policy- The government may provide favourable policies such as easing registration process and tax relief firms.
      4. Land- The government may provide cheap land.
      5. Security- The government may provide security to the new industrial areas.
      6. Social amenities- Schools, hospitals, recreational facilities to increase efficiency in production.
      7. Provision of reliable water sources for industrial use.
    2. Causes of business success in Kenya.
      1. Availability of credit at cheap rates.
      2. Proper planning and marketing of goods and services.
      3. Fair competition in the market and fair cost of inputs.
      4. Efficient management of business.
      5. Availability of skilled manpower which leads to efficiency.
      6. Use of modern technology that simplifies the activities.
      7. Favorable government policies and support that encourages interprenuers.
    1. Factors that may cause a shift of supply curve S1S1 to S2S2.
      1. An increase in either costs of production or inputs such as raw material and labour will make producers to reduce production/force some producers out of market.
      2. In availability/inadequate factors of production.
      3. Decrease in price of a good produced jointly with commodity X.
      4. Increase in price of a commodity that may be produced in place of commodity X.
      5. Low levels of technology applied in production of the commodity.
      6. Increase in tax charged on commodity.
      7. Decrease in subsidies offered by government in production of the commodity.
      8. Future expectation that the price of the commodity will increase.
      9. Unfavorable climatic condition such was drought and floods especially if commodity is an agricultural commodity.
    2. Insurance policies that may be beneficial to a hardware trader.
      1. Work men’s compensation policy to cover workers who may be injured in the cause of their duties.
      2. Personal injury policy that covers the owner in case of injuries/incapacitation.
      3. Fire policy to cover the risk of fire
      4. Burglary/theft policy to cover theft of stock and damaged of doors and windows.
      5. Goods on transit policy to cover any loss of goods as they are transported.
      6. Fidelity guarantee policy to cover any loss caused by dishonest workers.
      7. Window/glass policy to cover any damage to windows and glass in the premises.
      8. Cash on transit policy to cover any loss of cash as its being transported to the bank. (Any 5 x 2 = 10 marks)
    1. Limitations of using posters as a medium of product promotion
      1. Posters are a silent media of product promotion and may fail to attract the attention of the passers by
      2. They have little or no entertainment valve-hence they may not hold the attention of passers by
      3. Posters are affected by weather conditions and wears very fast
      4. Public often destroy them hence may not be seen by many
      5. Posters may not pass any message to the blind people hence not valuable to them
      6. Posters are only suitable for literate people –hence have no advertising value to the illiterate
        5x2 (10mks)
    2. Circumstances under which partnership could be dissolved
      1. Incase there is continued disagreement by partners-when partners disagree for long time, the last resort is to dissolve the business
      2. Incase of completion of the intended purpose- when the objective of the business has been achieved the business can dissolve
      3. Mutual agreement- partners can mutually agree to dissolve
      4. Request for dissolution – when a partner may request for dissolution
      5. Business engaging in unlawful practice-when a business engages in activities which contravene the law, it can be dissolved
      6. Court order- when a court has ordered a business to dissolve, the business has to comply
      7. Incase of death, insanity or bankruptcy
      8. When admitting a new partner
      9. When retiring a partner
    1. Differences between land and labour as factors of production.
      Land Labour
      • Refers to all resources provided by nature used in production.
      • Is geographically fixed in supply (supply cannot be increased).
      • Productivity reduces with constant use hence reducing in quality.
      • Provides raw materials for production.
      • Quality may be improved through adding fertilizer and manure.
      • Rewards for land are in form of rent, rates and lease. 
      • Refer to human efforts in production.
      • Is both geographically and occupationally mobile.
      • Increased through growth of population.
      • Efficiency in production increases with constant application through experience.
      • Provides services in production.
      • Quality may be improved through training.
      • Rewards for labour are in form of salaries, wages, commissions and royalties. 
      (5 x 2 = 10mks)
    2. Uses of material income statistics
      • Shows the country average standard of living of the people
      • Used as a tool/ basis of economic planning
      • Helps a country to know the contribution of several sectors of the economy to material growth.
      • Used to show a country’s performance in different countries
      • Used to show a country’s performance in different periods
      • Used to reveal how national wealth of a country is distributed among its citizens
      • Helps investors to make investment decisions from the data collected by undertaking market trends
        (Any 5 × 2 marks = 10 marks)
    1. Explain five factors that a business may consider when choosing an office layout. (10 marks)
      1. Desired impression
        More impressive layouts are preferred where the firm desires to create favourable impression to the outsiders.
      2. Costs of layout
        A cheaper or affordable office layout is chosen where a firm wishes to save on costs.
      3. Finance availability
      4. Competitors layouts
      5. Size of the business
      6. Nature of the business
      7. Technological and other modern changes in office plans
        Any five well explained
    2. Effects of declining population
      1. Reduces government expenditure, as the government spends less resources in the provision of services
      2. Discourages investment as the market for goods and services also declines forcing business to close down
      3. Reduces dependency of the unemployed on the employed as a declining population leads in reduction in labour supply creating employment opportunities
      4. Leads to proper utilization of lad and other resources as it reduces pressure created and other resources
      5. Declining population may enable a country to attain optimum population hence better living standards.
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