Business Studies Paper 2 Questions and Answers - Form 3 Term 2 Opener Exams 2023

INSTRUCTIONS

• Answer any five questions

1.  
   1. Explain five benefits that may accrue to a country that encourages entrepreneurship .10mks
   2. Highlight five differences between private limited company and public limited company. 10mks
2.  
   1. Explain five factors that justifies the exitence of a small scale firms in an economy. 10mks
   2. Explain five principles of insurance. 10mks
3.  
   1. Describe five channels of distribution for locally agricultural product. 10mks
   2. Explain five roles played by warehousing in the development of kenyas economy. 10mks
4.  
   1. In recent research shows that there has been an increance in quantity demanded for soft drinks , explain five reasons that account for this trend. 10mks
   2. Explain five factors to consider when selecting office equipments. 10mks
5.  
   1. Explain five uses of national income statistics. 10mks
   2. Explain five reasons that may lead to business success.10mks
6.  
   1. Explain five factors that influence the choice of means of transport.10mks
   2. Explain five features of perfect competition.10mks

MARKING SCHEME

1.  
   1. Explain the benefits that may accrue to a country that encourages entrepreneurship .10mks
      • Creation of employment. More jobs are created thus reducing many cases of unemployment
      • Use of local resources. Resource like scrap metals which would remain unsed are made economically important.
      • Reducing rural urban migration. As entrepreneurs set business in rural areas helps in employing local people hence no need to move in urban areas.
      • Improved living standards. Earnings that people gets from proiduction process enable people to have better lives.
      • Growth of technology. Enterpreneuers are able to come up with new methods of of production.
      • Saving on imports. Entrepreneurs produce goods which would otherwise be imported.
   2. Highlight five differences between private limited company and public limited company. 10mks
      

      Private limited company	Public limited company
      i.has minimum of two shareholders and a maximum of 50 ii.do not advertise its shares to the members of the public. iii.can start operation afte rreceiving a certificate of incorporation iv. shares are not easily transferable. v. managed by one or two directors.	i.has a minimum of 7 shareholders and no maximum ii. invites members of the public to subscribe to its shares iii.starts operations after receiving a certificate of trading iv. shares are easily transferable. v. managed by board of director

2.  
   1. Explain five factors that justifies the exitence 0f a small scale firms in an economy. 10mks
      1. size of the market. where the demand for the product is low a firm may opt to remain small.
      2. simplicity in organisation. some firms may opt to remain small because of simplicity in management.
      3. Flexibility. small firms are adaptable to changing circumstances.
      4. quick decision making. small firmms opt to remain small because there is no delay in decision making
      5. need to retain control. small firms may opt to remain small to retain control and indepedence.
   2. Explain five principles of insurance
      States that one should insure property that he/she is likeky to suffer a direct fianancial loss.
      1. Doctrine of good faith
         • The person taking out insurance contract must disclose all the relevant material facts when taking the insurance contract.
      2. Indemnity
         • The aim of the insurance is to restore back the insured to the same financial position before the loss.
      3. Proximate cause
         • States that for the insured to be compensated there must be a close relationship between the loss suffered and the insured risk.
      4. Contribution
         • Where the insured has taken policies with two or more insurers, the insurers contribute proportionately to indemnify the insured.
3.  
   1. describe the channel of distribution for locally agricultural products.
      
      • farmer → cooperative society → marketing board → retailer →  consumer
      • farmer → marketing board → wholesaler → retailer → consumer
      • farmer → wholesaler → retailer → consumer
      • farmer → marketing board → retailer → consumer
      • farmer → cooperative society → marketing board → wholesaler → consumer
   2. Explain five roles played by warehousing in the development of kenyas economy.
      1. Stabilizing prices. By storing surplus in the time of mass production and releasing the in times of low production helps in stabilizing prices.
      2. Creation of employment. Due to mas production of goods ha helped in creation of employment.
      3. Security of goods. Through warehousing goods are protected from theft and adverse weather conditions.
      4. Government revenue. Through taxation the government is able to raise finances.
      5. Steady supply. Through warehousing goods are stored until their demand arises.
4.  
   1. In recent research shows that there has been an increance in quantity demanded for soft drinks explain five reasons that account for this trend.
      1. Increase in consumers income. Increase in consumer level of income increases the ability to buy thus increasing the demand for soft drinks.
      2. Increase in total population. General increase in size of population increase the aggregate demand.
      3. Improved tastes and preferences. Tastes and prefernces coiuld have changed towards the soft drinks.
      4. Improved terms of sale. Availability of favourable terms of sale may lead to increased demand due to availability of finances.
      5. Government policy. Government may have come with policies that encourages consumption of soft drinks.
   2. explain the factors to consider when selecting office equipments. 10mks
      1. Cost. Initial cost or capital should be well analyzed according to the resources of the firm.
      2. Durabilty. It should be considered whether the equipment should be able to last for a long time.
      3. Availability of personnel. Business should consider whether there are qualified staff to operate the equipment.
      4. Adaptability. The equipment sdhould have the ability to cope with changing circumstances.
      5. Effect on staff morale. It should consider the staff feelings towards the equipment.
5.  
   1. Explain five uses of national income statistics. 10mks
      • Indicator iof standards of living. Increase in national income indicates improvement in living standards.
      • Comparing living standaerds between countries. A country with higher national income is said to have a higher living standaerds.
      • Assessing the performance of the economy. Increase in national income indicates that the economy is performing better.
      • Planning the econmy. National income statistics are used by the goernment in planning for the econmy.
      • Investment decisions. Entrepreneurs can use national income statistics in maaking investment decisions.
   2. Explain five reasons that may lead to business success.10mks
      • Availabilty of raw materials. A business with adequqte raw materials is likely to continue with its operations.
      • Market research. Market research enables the business to understand consumer behaviour.
      • Adequate finance. A business that has adequate capital is likely to do better.
      • Proper finance mamagement. Managing the finances available for the intented purpose may led to businees success.
      • Favourable government policies. A business that is favoured by government policies is likely to succeed.
6.  
   1. Explain the factors that influence the choice of means of transport.10mks
      • Cost. Where cost is factor the cheapest means should be selected.
      • Nature of goods. Perishable good require fast means of transport.
      • Reliability. A means that has assurance of goods reaching final destination should selected.
      • Urgency. Goods that are required urgently a fast means should be selected.
      • Security. Means of tranport should ensure goods in transit reach their destination.
   2. Explain five features of perfect competition.10mks
      • Large number of buyers and sellers. Buyers and sellers are so many such that the action of one of them has no effect on the market.
      • Uniformity of products. Commodities from different producer are identical in all aspects.
      • Perfect knowledge of the market. Each buyer and seller has perfect knowledge oif the market.
      • Freedom of entry and exit. Buyers and sellers have freedom to enter and leave the at will.
      • Uniformity of buyers and sellers. All buyers are identical in the eyes of the sellers.