Name…………………………………………………………..

Admission Number…………………

School……………………………………………….Date……………..………………………………

BUSINESS STUDIES stream…………………………………………..

Paper 2
MAR 2024
1
2 Hours.
2

LESSON STUDY EXAMINATIONS SERIES

Instructions to candidates
a) Write your name and index number in the spaces provided above.
b) Sign and write the date of the examination in the spaces provided above.
c) This paper consists of six questions.
d) Answer any five questions.
e) Write your answers in the spaces provided after question six.
f) All questions carry equal marks
g) This paper consists of 3 printed pages.
h) Candidates should check the question paper to ascertain that all pages are printed as indicated
and that no questions are missing.
i) Candidates should answer the questions in English.
For Examiner’s Use only
Question Maximum Candidate’s score

Score

1 20
2 20
3 20
4 20
5 20
6 20
1. a) Explain five features of economic resources. (10marks)
b) Explain five ways of determining the size of a firm. (10 marks)

2. a) Commodity A and B are substitutes. Using well labeled diagrams, explain how an increase in
supply of commodity A will affect the equilibrium price of commodity B. (10 marks)

b) Explain five differences between sole proprietorship and partnership form of business unit.
(10 marks)

3 a) Explain five principles of insurance. (10 marks)

b) Explain five benefits that accrue to an organization that adopts open office plan. (10 marks)

4. (a) Explain five benefits of entrepreneurship in an economy. (10marks)

(b) Describe five channels for distributing locally manufactured products to local consumers.
(10marks)

5. (a) Explain five differences between goods and services. (10marks)

(b) Define the following types of wholesalers.

a) Regional wholesalers
b) Nationwide wholesalers
c) General merchandise wholesalers
d) Specialised wholesalers
e) Mobile wholesalers. (10 marks)

6. (a) Explain five current trends in office management. (10 marks)

(b) Outline five assumptions associated with the circular flow of income. (10 marks )
 MARKING SCHEME
1. a) Explain five features of economic resources. (10marks)
i They are scarce / limited in supply they are found in small quantities to the many uses which
they have to be put / not sufficient to satisfy all human wants.
ii They have money value they have a price / reward attached to them which must be paid for their
use / to get them.
iii They are unevenly distributed / they are not distributed uniformly some regions / places /
areas / countries have more resources than others.
iv They have utility they have ability to satisfy human want
v Can change ownership / transferability they can change possession from one person to another
through sale / donation / inheritance / gift.
vi Have alternative uses they can be put into different uses / occupations.
vii Complementary / combinability they can be used jointly / can be used in different proportions to
produce goods and services.
viii Mobility some can be moved from one place / region to another.
ix Exhaustibility / renewability some resources get depleted / finished / restored / regenerated.

b) Explain five ways of determining the size of a firm. (10 marks)

i. Level of output/volume of output A firm’s size may be judged by the level of output. A large
firm will produce on large scale, while a small firm will produce on small scale.
ii. Number of employs in the firm A small firm is likely to employ only a few employees, while
a large firm will most often employ many workers.
iii. Size of the market controlled by the firm Large firms control large proportions of the total
market of a particular product. Small firms may only control a small size of the market.
iv. Capital invested The larger the capital of the firm in terms of assets the larger the firm and
vice versa.
v. Methods of production adopted A large firm will most often adopt capital intensive methods
of technology, where operations will be highly mechanized while small firms use more labour
than machinery.
vi. Sales of volume Small firms have low levels of sales with a given period while large firms
have huge levels of sales.
vii. Floor area covered by the premises A firm with large floor area covered by premises may be
said to be large.

2. a) Commodity A and B are substitutes. Using well labeled diagrams, explain how an increase in
supply of commodity A will affect the equilibrium price of commodity B. (10 marks)
 b) Explain five differences between sole proprietorship and partnership form of business unit.
(10 marks)
Sole proprietorship Partnership.
Owned by sole proprietor / sole trader Owned by partners
Shares profit alone Profits shared by partners (according to capital
contribution)

Makes decisions alone Decisions are made jointly by partners

Managed by sole proprietor Managed by partners themselves

Main source of capital is owners own contribution Main source of capital is contributed jointly by
/ personal savings partners
Formed by sole proprietor Formed by a minimum of 2 partners and
maximum of 20 partners.
Faster decision making Slow decision making (due to consultations)

3 a) Explain five principles of insurance. (10 marks)

i Principle of indemnity. The insured can only be compensated for the actual loss covered./
insured is being returned to his financial position before the loss.
ii Principle of utmost good faith. Insured is required to reveal material facts relating to property
being insured.
iii Principle of insurable interest. The insured should only insure property / life that he stands to
suffer a direct financial loss in case risk insured occurs.
iv Principle of proximate cause. For insured to be compensated there must be a very close
relationship between the loss suffered and risk insured against.
v Principle of subrogation. After the insured has been compensated, the remnant of the insured
property becomes the property of the insurer.
vi Principle of contribution. In case one has insured with more than one insurance companies, in
case of loss, all the insurers would compensate / contribute proportionately to indemnify the
insured.
b) Explain five benefits that accrue to an organization that adopts open office plan. (10 marks)
i. Easy supervision/monitoring of workers performance since they are in the same room.
ii Minimal cost/it is cheap to construct/maintain/decorate.
iii Discourages/minimizes absenteeism/lateness/early departure of employees
due to close monitoring/supervision.
iv Sharing of resources/facilitates/equipment/it makes possible for joint use of office facilities
hence enables the firm to save on cost of acquiring more/duplication of resources/wastage of
resources. Accept examples of shared facilities as naming.
v Floor space is saved/economizes on space since it has not been lost through partitioning/can
accommodate more staff.
vi Low construction, maintenance and decoration costs since no partitions
vii Easy/faster location of staff/employees since they work in the same room.
viii Minimizes/discourages laziness/idleness/laxity since they can see each other/monitor each
other/check each other
 ix Enhances team work/feeling of togetherness/employees work as a team/learn to be
together since they share ideas and consult each other/promote friendship/personal
understanding.
x Easy/fast communication between workers/departments since there are no physical
barriers/ they are found in the same room.
xi Discourage misuse of office resources/corruption thus promoting
transparency/integrity/accountability/ethics.
xii Faster flow of work due to reduced movement/ working with one other
xiii Easy organization/re arrangement/ redesigning the office when need arises.

4. (a) Explain five benefits of entrepreneurship in an economy. (10marks)

i Creation of employment-Through entrepreneurship, jobs are created which help in
absorbing people who would otherwise have been jobless e.g. people employed in the jua
kali sector.
ii Formation of capital-Profit earned by entrepreneurs may be used to expand the business
or even to start other businesses.
iii Raising standards of living-Entrepreneurs pay wages and salaries to their employees
which enable them to acquire goods and services they need to live comfortable lives.
iv Encourages the use of local resources-Entrepreneurship makes it possible to use/exploit
local resources. Idle resources such as scrap metal may be used to make jikos.
v Improving infrastructure-The existence of businesses in the economy makes the
government establish or improve infrastructure such as roads.
vi Savings on imports- entrepreneurs are able to produce goods and services that are a
substitute to imports. This helps the country to reduce the amount of import expenditure.
vii Reducing foreign dominance of the economy-Participation of local entrepreneurs in
various business activities helps in reducing investments by foreigners.
viii Promotion of technology/promotion of innovation, research and development-
Entrepreneurs are creative and they come up with new and better ways of accomplishing
tasks.
ix Promotion of entrepreneurial culture/helps in the creation of role models- Successful
entrepreneurs/entrepreneurial ventures encourage other members of society to initiate their
own businesses.
x It contributes to government revenue-Taxes and fees paid by entrepreneurial ventures
constitute part of government revenue /income that helps it to facilitate its operations.
xi It promotes economic growth-Entrepreneurs produce goods and services. This increases
the volume of goods and services in the economy leading to expansion of the economy.
xii It may promote self-actualization and esteem-By initiating businesses in which they are
their own bosses / entrepreneurs pride is boosted and this may promote the overall
productivity of the economy.

(b) Describe five channels for distributing locally manufactured products to local consumers.
(10marks)
• Local manufacturer →manufacturer’s agent →local wholesaler→retailer→consumer
• Local manufacturer →local wholesaler→retailer→consumer
• Local manufacturer →local consumer
• Local manufacturer →local wholesaler→local consumer
• Local manufacturer →local retailer→local consumer
• Local manufacturer →local manufacturer rep→local wholesaler→retailer→consumer
5. (a) Explain five differences between goods and services. (10marks)

A good A service
Goods are tangible Are intangible
Quality can be standardised Quality varies
Can be stored Cannot be stored
Can be separated from the owner Cannot be separated from owner
Goods paid for ownership Services paid for experience
Not always perishable Always / highly perishable.

(b) Define the following types of wholesalers. (10 marks)

a) Regional wholesalers operates only in a given region or area.
b) Nationwide wholesalers supplies their products in all parts of the country
c) General merchandise wholesalers wholesaler deals in a wide range and variety of goods
d) Specialised wholesalers deals in only in one type of product in a particular line such as
maize grain only.
e) Mobile wholesalers. are wholesalers who move from place to place supplying goods to
retailers e.g. soda distributors, bread distributors, beer distributors.
6. (a) Explain five current trends in office management. (10 marks)
i Office location/relocation – organizations tend to move away from congested town
centres/to peri-urban areas/outskirts.
ii Use of modern equipment /organizations have adopted modern
equipment/automation/computers – for efficiency/accept any benefit of automation as a
qualification.
iii Landscaped/open office layout – adopted to facilitate on supervision and economize on
floor space/improve ambience/comfort for the office staff.
iv Engagement of multi-skilled staff – able to carry out different tasks/ save on labour cost.
v Innovative ways of motivating staff – to improve product/loyalty/through tours, meals at
work, transport, medical cares.
vi Capacity building – to develop staff skills/competence.
vii Time management – use of (biometric) clocking system to control staff movement.
viii Public relations/customer care services/desk – to enhance customer satisfaction
ix HIV/AIDS awareness/policy – to sensitize employees/avoid discrimination
x Stress management – to promote good health/coping at workplace
xi Surveillance/enhanced security – by use of CCTV/ metal detectors/biometric/accept
relevant examples of security enhancing gadgets as qualification.
xii Inclusivity – to promote equal opportunities in employment/accept examples of
inclusivity aspects as qualification.
xiii Environmental conservation – to minimize degradation/ ensure sustainability.
xiv Use of name tags/badges – for easy identification
xv Corporate social responsibility – to give back to the community
xvi Team building – to enhance bonding/interaction/team spirit.
xvii ISO compliance – to meet internationally accepted standards in service delivery/accept
examples/component to get certification as qualification
xviii Outsourcing – contracting non – core activities
xix Performance contracting – to ensure that set targets are met
(b) Outline five assumptions associated with the circular flow of income. (10 marks)
i There are only two sectors B that is household and firms
ii House holds spend all their income to buy goods / services without making savings
iii Firms spend all their revenue on factors of production
iv There is no government intervention inform of taxation / licensing
v The economy is closed as there are no international trade / export and import
vi All output produced by the firm is purchased by households hence no surplus
vii There are no injection / leakages /savings