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Business Studies Paper 2


i).Liners have fixed schedule/ time table which enables a trader to plan the transportation
ii).Liners have fixed rates / fares which allows for budgeting.
iii).Liners are more reliable than tramps because they don’t change routes making the trader to be more confident
iv).Can carry bulky / heavy / more goods at a time.
v).Cover longer distances than tramps
vii).May provide discounts to its regular users.

20 marks


a).Measures that may be taken by the government to promote export trade.
i).Providing export subsidy thus making it cheaper for exporter

ii).Looking for more markets abroad through KETA enabling more to be exported

iii).Organizing fairs and exhibitions in foreign countries to create awareness.

iv).Encouraging production of high quality goods to increase their competitiveness.

v).Easy export licensing for exporters to facilitate export licensing

vi).By using commercial attaches to promote country’s goods in foreign countries to create awareness.

vii).Diversifying her export commodities for market security / cushion slump in demand

viii).Lowering duties on imported raw materials meant for export to encourage re-exportation ix).By establishing export processing zones, EPZs which enhance more exports

x).By entering into bilateral trade agreement with other trading partners to improve their terms of trade

20 marks


a).Circumstances under which a manufacturer would use wholesalers to distribute his products
i).Where the market is spread out thus making it uneconomical and expensive for the producer to sell directly.

ii).Where the producer does not have adequate capital to set up his own distribution network
iii).If there is a government policy which separates the functions of producing, wholesaling and retailing.

iv).Where the nature of goods requires the wholesaler to carry out certain services eg breaking of bulk, blending, sorting etc.

v).Where the producer lacks transport facilities which can be provided by the wholesaler vi).Where there are small scale retailers who are likely to buy from wholesalers and not directly from the manufacturer.

vii).Where the manufacturer has no ability to manage distribution outlets. (Any 5×2=10mks)

b). Functions of the central bank of Kenya in the economy.
i).Currency issue- CBK issues currency notes and coins. It regulates the supply of money in the economy.
ii).Banker to the government – CBK accepts deposits from the government for safe keeping. It also manages national debt and advises the government on economic and financial matters.
iii).Banker to commercial banks - CBK provides banking services to commercial banks.
iv).Controller of commercial banks – CBK directs and advises commercial banks on their operations.
v). Lender of last resort – CBK lends money to the government and commercial banks in times of crisis.
vi).Credit control – CBK regulates the amount of money in circulation thus limiting the lending capacity of commercial banks and stabilizes the economy.
vii).Custodian of foreign currency reserves – CBK regulates the inflow and outflow of foreign exchange in the economy.
viii).Clearing house – CBK facilitates clearance of interbank indebtedness arising from cheques drawn on each other. (Any 5×2=10mks)

20 marks


b).Circumstances under which a firm would be located near the market for its products.
i) When the products are perishable thus require fast delivery

ii) When the products are bulky / heavier than the raw materials

iii) When the products are fragile to avoid loses through breakage

iv) When its cheaper to transport raw materials than the final product

v) When the raw materials are in the same location as the market for the product

vi) When it is the government policy that firms locate near their markets

vii) When the unit value of the products is high/ may pose security threat during transportation (Any 5×2=10mks)

20 marks


b).Ways in which an entrepreneur contributes to the production of goods.
i). Identifies viable business opportunities
ii).Provides guidelines on how production should be organized
iii).Provides the capital necessary to carry on production
iv).Hires /provides all other factors of production
v).Bears all the risks
vi).Decides how/ where/ when / what to invest in the business
vii).Rewards all the factors of production. (Any 5×2=10mks)

20 marks


a).Means of payment a trader uses to settle his debts
i).Cash-where a trader accepts or uses currency notes and coins for payment
ii).Bills of exchange –where a trader discounts or uses an acceptance bill of exchange to pay.
iii).Debit cards that allows traders to make payment without carrying money
iv).Money order-means of payment provided by the postal corporation on request.
v).Cheque –order to the bank to pay the person named the amount indicated in the cheque
vi).Postal order – means of payment sold by the postal corporation in fixed denominations.
vii).Credit transfer- means of paying a large group of people using a single cheque
viii).Standing order- An order by an account holder to his bank to pay a fixed sum of money to a named person /institution until the order is revoked.
ix).Credit cards that allow traders to make payments without carrying money (Any 5×2=10mks)
b).Indicators of underdevelopment in Kenya
i).High poverty level where majority live below the dollar rate per day
ii).Low income earnings where majority of the labour force are unskilled
iii).High level of malnutrition since majority can not afford the basic foodstuff for sustenance
iv).Poor infrastructure /inadequate infrastructure due to misuse / misallocation of funds
v).High level of illiteracy as majority can not afford to educate their children due to high cost of education
vi).High unemployment level due to inappropriate education/ skills/training /few job opportunities / vacancies
vii).Disparity in income levels due to corruption / embezzlement of funds
(Any 5×2=10mks)

20 marks

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