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Business Studies Paper 2

Answer any five questions

a)Ways in which the government can encourage entrepreneurial development.

i. Fair taxation - when businesses are taxed fairly the investors are encouraged to invest in the country.

ii. Fair legislation / licensing – the government can encourage business activities by having easy registration procedures / requirements.

iii. Easy access to finance / credit facilities /loans – the government can instruct commercial banks / financial instruction to give easy access to loans / charge low interest rates .

iv. Adequate / proper security to allow business to operate without fear .

v. Improved / adequate infrastructure .for example good transport network for easy access to market / firms .

vi. Enhancing training of entrepreneurship by opening more training institutions. vii. Enhancing political stability in the country to attract investors.

b.Benefits that a trader would get by advertising his goods through radio.

i. Wide geographical coverage. This information can reach more people as it has wide geographical coverage.

ii. High frequency / repetition of the message. The advertisement can be repeated and this makes more people to access the information .

iii. Allow use of many languages . This makes the advertisement to reach people of different languages.

iv. Advertisement can be entertaining as it can be accompanied by music.

v. It is relatively cheap / affordable and this makes more people to use it.

vi. Listening to radio is easy and not as reading a newspaper.

20 marks


a)Effects of eliminating the wholesaler from the chain of distribution.

i. Cost of distribution may reduce and the benefits passed over to the consumers.

ii. Cost of distribution may increase due to transport and the burden may be passed to the consumers.

iii. The consumers may fail to receive the goods into place of their conveniences due to lack of breaking the bulk.

iv. Manufacturer may fail to get the information of market trend.

v. Manufacturer may be forced to store the goods by themselves passing the burden to consumers.

vi. Manufacturer may be faced with finance deficit as there will be no traders purchasing goods in bulk.

vii. Consumers may be unable to get credit facilities which are offered by intermediaries .

viii. Manufacturer may be forced to advice the consumer on the usage of goods.

b. Functions of commercial Attaches

i. They explore new market for more export opportunity from home country.

ii. Study / Analyses market for exports from home country.

iii. Keep statistics of product quality / packaging / size /method of manufacturing home product.

iv. Research / keep data of new products for exports / new commodities needed in the market.

v. Advertise the country’s products to country export abroad.

vi. Publish information relating to home country goods.

vii. Inform traders in their home country’s of standard of goods required.

viii. Organize visits to trader fairs / exhibitions for businessmen from home countries.

ix. Select buyers / Agents /distributors of home country’s export.

x. Assist sale’s mission from home home country’s in foreign country.
xi. Make report on commercial activities that may help improve export of home country products.

20 marks


a)Ways that the government can use to raise funds to finance it’s programmes.

i. Surpluses from public corporations – which provide services at a fee surplus revenue from these corporation is remitted to the government.

ii. Fines and penalties – imposed by the court on firms and individuals who break the law of the land. these money becomes public revenue .

iii. Stamp duties – collected by land ministry on land transaction such as land transfer.

iv. Borrowing - from external sources e.g. I. M. F, W.B and friendly countries.

v. Rent and rates – for use of government properties.

vi. Dividends and profits –from government investments.

vii. Sales of government assets – such as old houses vehicles and its stake in various companies and parastatals.

iii. Public debt –borrowing from within the country by use of treasury bonds and bills.

ix. Donor aids and grants from other countries.

x. Escheats – unclaimed property of deceased persons.

xi. Taxes – which are compulsory payment to the government and benefits everyone in society.


20 marks


a) Ways in which government can practice trade restriction

i. Tariffs - These are taxes levied mostly on imported goods which make them to be expensive hence hindering their purchase.

ii Total bans – This a complete prevention of certain commodities entering into the country hence restricted.

iii. Quotas - This is the restriction on the volume of commodities to be imported into a country over certain period.

iv. Embargoes – An embargo is an official order stopping trade within a country.

vi. Custom draw back - Complicated import procedures on certain products may discourage individual / business from trading.

vi. Administrative control - A government can use various rules / control as a way of protecting imports viii. Foreign exchange control – The government may restrict foreign exchange required is pay for imports.

b) Circumstances under which the following means of payment can be used

i. Standing order – Where the trader wants to make specific amount of money to a certain business for a given period of time .This is mainly applied in payment of rents , Hire purchase etc.

ii. Credit card - where the customer may not want to carry large amount of money for security reasons / where it is a business policy for the customer to use credit card.

iii. Credit transfer – when the business organization would like to pay many employees (earning in the same commercial bank) using one cheque.

iv. Crossed cheque - where the business organization would want to ensure safety of payment to the right creditor / person

v. Postal order – Where the business organization would like to make fixed payment which involve smaller denomination.

20 marks



b. Negative change in demand of bread.

i. Increase of the price of bread. This will make people to buy less bread .

ii. Decrease in the price of other related commodities. People will buy more of the related commodities than bread.

iii. Low income of consumer’s .This reduce their purchasing power making them buy less bread.

iv. Low income distribution if the income is unevenly distributed then less of bread is bought.

v. Negative taste / preference of consumers. This affect the demand making the demand decrease.

vi. Consumer expectation in future .Future expectation of a future fall in price might have lid to decrease in demand.

vii. Decrease in population . This may have lead to the fall in demand of bread.
viii. Government policy / unfavorable government policy .High taxation raise the price leading to fall in demand

ix. Seasonal change in disfavor of bread might have led to decrease in demand.

20 marks


a )Ways in which production activities may adversely affect the community

i. Pollution – most manufacturing / production activities damage the environment by releasing substance which may be dirty/ harmful.

ii. Degradation of environment – this may occur due to overuse of resources.

iii. Depletion of energy sources from excessive use of non – renewable natural resources i.e. oil / wood fuel /whish affect the energy in future.

iv. Social effects – Localisation of the firms has lead to several problem such as congestion / traffic jam / development slum

Mzalendo Traders.

Trading , profit and loss a/c

For period ended 31st December 2012.

20 marks

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