KCSE Business Studies Topical Questions and Answers

Explain five features of oligopoly. (10 marks)

1/12/2021

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Explain five features of oligopoly.

Features of oligopoly include:

Firms are interdependent in decision making. Firms keenly observe each others’ actions/decision hence acting in any way triggers counter reactions (from other firm s).
Firms deal in products that are homogenous or similar. The products are close substitutes of each other and are only differentiated in terms of aspects like colour/packaging/shapes/pricing/branding.
Firms may engage in non-price competition/collusive oligopoly. The firms under oligopoly may avoid price wars hence only compete via other means like aggressive advertising/after sales services/market segmentation/fixing quotas.
Unpredictability of behaviour/uncertainty since firms under oligopoly keep reacting to market changes differently/actions taken by other firms within the market may take others by surprise.
The market is made up of a few large firms since such firms operating under oligopoly tend to have a large capital outlay/make extensive use of modem technology in their production activities/control substantial share of the market.
There are limiting factors such as large capital investment required to be a player in this market/the level of technology involved may keep off possible entrants into the market/intimidation/collusion.
Firms may engage in price wars/rivalry/cut throat competition which may lead to survival/collapse of some firms.
May lead to price rigidity/kinked demand occasioned by fear of other firms’reactions.
There may be price leadership where the dominant firm dictates the market price/rules the market.

Explain five features of oligopoly. (10 marks)

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The following trial and balance relates to business of Mali Ngumu traders as at 30th June 2008.

8/11/2021

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The following trial and balance relates to business of Mali Ngumu traders as at 30th June 2008.

Required:

(a) Prepare a trading profit and loss account as at 30th June 2009. (8mks)

(b) Calculate the following ratios:- (4mks)

(i) Rate of return on capital

(ii) Margin

(iii) Quick ratio

(iv) Rate of stock return over

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Explain four ways in which man uses clothing to satisfy his wants

8/11/2021

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Explain four ways in which man uses clothing to satisfy his wants (4mks)

Usefulness of clothing to man.

Clothing protects man from unfavorable weather conditions e.g. coldness and rain.
Clothing protects man from getting injuries that a rise from scratches of thorns.
Clothing protects man from exposing his/her nakedness hence maintains respect.
Clothing helps man in maintaining his posture e.g appears smart.
Clothing protects man from bites arising from insects and other animals.
Clothing protects man skin from dangerous rays originating from the sun that may cause skin cancer.

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State six Characteristics of Underdeveloped Countries.

8/11/2021

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Most countries in the world are under-developed. Give six characteristics of these countries (12mks)

Characteristics of under-developed countries.

High population growth rate and dependency ratio
Have got widespread unemployment.
Have got high levels of poverty.
Usually depend on agricultural and other subsistence activities.
Have a low level of urbanization
Their natural resources are normally under-utilized.
Their income is unevenly distributed among citizens.
Spend a high proportion of their income on food and other basic necessities.
Use a low level of technology in production.

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Discuss four factors that determine the level of a country’s national income

8/11/2021

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Discuss four factors that determine the level of a country’s national income (10mks)

Four factors that determine the level of a country’s national income.

The quality and quantity of factors of production e.g labour supply, capital available and size of natural resources.
Level of technology i.e. advanced technology lead to production of high quality goods and vice versa.
Size of population - high population leads to a high national income since most resources will be exploited.
Political stability - creates a conducive environment for the exploitation of resources.
Attitude of the people towards work- a country whose people have a culture of liking work attain a high level of national income.

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Give five contributions of commercial banks in Kenya

8/11/2021

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Give five contributions of commercial banks in Kenya (10mks)

Contributions of commercial banks

Accepting deposits from the general public.
Provides a means of making payments – cheque.
Provide loan facilitates to the investors
Makes foreign exchange payments.
Provides safe keeping facilities for valuables.
Facilitates in discounting bills of exchange.
Makes payments on behalf of customers –standing orders.
Acts as customers agents in the stock exchange market.

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Explain five importance of an efficient transport system in a country

8/11/2021

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Explain five importance of an efficient transport system in a country (10mks)

Five importance of an efficient transport system.

Transport promotes trade by enabling movement of goods from production sites to consumption areas.
It facilitates the growth of industries by transporting raw materials and labour.
It creates employment opportunities.
It opens up new markets since goods produced can be moved to the consumers.
It encourages mass production since they can be taken where they are needed.
It helps in minimizing wastage of goods and services.
It helps in facilitating specialization.
It assists in adding value to goods and services by taking them to where they are needed.
It facilitates movement of labour.
It encourages interaction of communities.

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What are the reasons why many Kenyans are unemployed?

8/11/2021

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Describe six causes of unemployment in Kenya (12mks)

Six causes of unemployment in Kenya

Rapid population growth that surpasses the growth of the economy
In appropriate education system in the country.
Seasonality in production especially in agricultural and tourism.
Lack of capital for investment in order to generate job opportunities.
Rural-urban migration – Most labour moving to urban in search of employment.
Low demand for goods and services leading to little investment hence few employment opportunities.
Trade unions pressurizing for high salaries forcing employers to reduce their investments or use machines in production.
Use of an appropriate methods of production e.g use of machines such as ATM and Cranes.

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Briefly explain the meaning of the following forms of advertising

8/11/2021

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Briefly explain the meaning of the following forms of advertising (8mks)

(i) Celebrity advertising

This is a form of advertising that uses of a prominent person on the product to encourage people to buy the product e.g a president, athlete, a footballer etc.

(ii) Product advertising

This is a form of advertising that put emphasis on the brand name of a product.
It is meant to promote that particular product.

(iii) Informative advertising

This is an advertising that gives general information of a product to a customer e.g price quality, uses, and side effects and where it is found.

(iv) Institutional advertising

This is a form of advertising which is meant to popularize or a business.
More emphasis is put on the name of the business.

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Discuss five strategies that can be used by the government to control inflation

8/11/2021

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Discuss five strategies that can be used by the government to control inflation (10mks)

Five strategies used by the government to control inflation

Reducing government spending.
Increasing taxation in order to reduce amount of income in the hands of people.
Controlling amount of imports to reduce foreign spending
Discourage financial institutions from lending money.
Imposing a maximum on wage bills to control cost push inflation.
Imposes tariffs on imported goods to make them expensive thus reduce their demand.
Controlling foreign exchange to limit importation of goods.
Imposes imports quotas to reduce amount of imported goods.

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Discuss five advantages of a bonded warehouse

8/11/2021

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Discuss five advantages of a bonded warehouse (10mks)

Five advantages of a bonded warehouse.

Storage helps an importer to look for market.
Helps to protect goods safely against pilferage or spoilage by bad weather.
Gives a government a chance to scrutinize the goods.
It enables a government to collect taxes.
Records kept in a bonded warehouse is a source of statistics on a country’s imports.
Enable a trader to look for a market while goods are in bond.
Gives an import chance to prepare the goods before channeling them to the market.
If an importer sells goods while at bond, the burden of paying duty passes to buyer.

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Explain five external factors that influence the success of a business

8/11/2021

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Explain five external factors that influence the success of a business. (10mks)

Human resources – presence of a pool of skilled workers enables a business to perform well.
Political factors – favourable government laws favours performance of a business.
Economic conditions – favourable prices, low interest rates and good infrastructure.
Technological factors – improved technology reduce cost of operating business.
Favourable environmental factors – i.e good climate boost farming and tourism.
Level of competition.
Identification of customers needs.
Understanding social cultural factors of the consumers i.e tastes and preferences

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Name four types of marine insurance policies

5/11/2021

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Name four types of marine insurance policies. (4mks)

Four types of marine insurance policies.

Voyage Policy - Taken by the ship owner to cover the ship while undertaking a particular voyage.
Time Policy -To cover the ship for a period of time.
Floating Policy - To cover the ship when it undertakes voyage and it is only in force when the ship sails.
Mixed Policy - It combines the features of a time and a voyage policy.
Port Policy - To cover the ship while at the port.

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Describe the following types of unemployment:

5/11/2021

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Describe the following types of unemployment:

(i) Disguised unemployment (2mks)

Disguised unemployment - this is where more workers are employed than are necessary in an organization. Under this circumstance, dismissal of some of the workers will not cause the overall output of the organization to fall.

(ii) Seasonal unemployment (2mks)

Seasonal unemployment - it arises as a result of the seasonality of work. It occurs where production is not continuous e.g in the agricultural sector, many people are employed to prepare farms for planting, but after planting is done, such workers have no further work to do until harvest time. They remain unemployed for the period in between. After harvesting, they again remain unemployed until the land will need preparation for next planting.

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List four factors that are likely to hinder economic development in Kenya.

5/11/2021

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List four factors that are likely to hinder economic development in Kenya. (4mks)

Four factors that are likely to hinder economic development in Kenya.

Low level of savings which leads to low investment, low productivity and low income.
Political instability which may discourage potential investors from investing.
Poor natural resource endowments in Kenya where some places are deserts and have no minerals.
Poor set up of economic institutions - poorly structured financial market, poorly set commodity markets, poorly established labour and capital markets inhibit economic development. In Kenya, cash crop farmers suffer because of this problem. Their produce is collected rate from their farms, inputs are provided much later the onset of the planting season, credit is given after a lot of struggle by the farmer and proceeds of the farmer produce is delayed and in some cases embezzled.
Lack of skilled manpower- hindering the exploitation of available natural resources.
High rates of population growth - where much of the income that is generated goes into providing basic requirements of life rather than to production activities.
Cultural beliefs and attitudes - which may prevent people from adopting modern methods of doing things and hence hindering economic development.

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Name four possible barriers to international trade

5/11/2021

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Name four possible barriers to international trade. (4mks)

Four possible barriers to international trade.

Language barriers.
Political differences among nations.
Wars.
Trade laws and regulations in different countries hinder international trade.
Trade restrictions imposed by governments.
Differences in currencies.
Poor means of transport and communication.
Long distances.
Cultural differences.
Physical barriers e.g mountains, rivers, lakes and oceans
Ignorance

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Outline four ways in which the Central Bank controls the operations of commercial banks

5/11/2021

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Outline four ways in which the Central Bank controls the operations of commercial banks. (4mks)

Four ways in which the central bank controls the operations of commercial banks.

By licensing commercial banks/approves establishment of commercial banks and issues them with a license.
By regulating the rates of interest that commercial banks charge their customers for loans borrowed.
By determining the cash ratio which determines the commercial banks’ ability to create credit.
By determining the liquidity ratio of commercial banks- which may limit the commercial banks’ ability to create credit.
By controlling the establishment of branches of the banks.
By determining the minimum capital requirements for the establishment of commercial banks.
By requiring the commercial banks to deposit a certain percentage for their customer’s deposits in the central bank.
By requiring that commercial banks maintain an account in the central bank, which facilitates the clearing process.
By setting the margin requirement. The central bank does this by setting the security requirements for applying for loans.

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List four advantages of credit sales to a seller

5/11/2021

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List four advantages of credit sales to a seller. (4mks)

Four advantages of credit sale to a seller.

The seller is able to create goodwill with his customers.
Selling on credit increases the businessman’s profit due to increased sales.
Goods sold on credit are usually sold at high prices, meaning higher profits to the seller.
The seller is able to increase his sales volume.

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State four consequences of eliminating wholesalers from the chain of distribution

5/11/2021

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State four consequences of eliminating wholesalers from the chain of distribution. (4mks)

Four consequences of eliminating wholesalers from the chain of distribution.

Manufactures may be forced to open up additional distribution outlets, which might increase their costs thereby lowering their profits.
The removal of wholesalers will in effect decrease the cost of distribution, hence higher profits to the producers.
Producers will not specialize since they will also be carrying out the distribution function, hence they will not enjoy the economic advantage of specialization.
Prices may be unstable in their absence since they help in stabilizing prices by storing large quantities of the produce.
Producers may need to establish additional storage facilities, which were previously provided by wholesalers, hence requiring them to raise more capital.
Retailers will be forced to buy in bulk thereby requiring them to have more capital, which may not be available.
Retailers may be forced to pay cash thereby requiring them to increase their capital base.
Manufacturers may be forced to break bulk, since the retailers may not be able to buy in large quantities.
Retailer may be forced to establish warehouse, which would require additional investment.

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Outline four main functions of an office in any business organization

5/11/2021

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Outline four main functions of an office in any business organization. (4mks)

Four main functions of an office in any business organization.

Receiving and sending out information.
Sorting and dissemination of information/information is sorted out and passed on to the relevant members of staff.
Storing of information e.g in files, computer disks and other storage devices.
Reproduction of documents e.g printing, photocopying and duplication.
Safeguarding the organization’s property and recording its movement and usage.

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Highlight four factors that may hinder the expansion of small scale business enterprises.

5/11/2021

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Highlight four factors that may hinder the expansion of small scale business enterprises. (4mks)

Four factors that may hinder the expansion of small scale business enterprises

Inadequate capital may cause a business to remain small because without capital a business may not be able to expand.
Lack of entrepreneurial skills may hinder the expansion of the business.
Lack of adequate security may discourage businessmen from expanding their business to avoid incurring high losses in case of a robbery.
Low purchasing power of consumers/the size of market is small.
Employment of unskilled labour causes poor performance which leads to the stagnation of a business.
Small businesses face stiff competition from larger and well-established businesses forcing them to remain small.
Most small-scale businesses are located in rural areas, where the infrastructure is poor, a situation that hinder their expansion.
The subsistence lifestyle of consumers in rural areas leads to low business activity which inhibits the growth of the small businesses in the rural areas.
Poor lending policies.

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State four limitations of billboards as a tool of product promotion.

5/11/2021

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State four limitations of billboards as a tool of product promotion. (4mks)

Four limitations of billboards as a tool of product promotion.

They can be destroyed by weather, since they are exposed to the elements of nature.
They can be vandalized, since no security is provided for them.
They are not useful to the blind persons since they can neither see nor read the message.
They can be ignored since they are silent.
The do not target a particular group of consumers.
They are expensive to erect and maintain.
They may cause obstructions to motorists if they are not well erected.

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Outline four reasons that have led to the growth of the savings and credit Co-operative Societies in Kenya.

5/11/2021

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Outline four reasons that have led to the growth of the savings and credit Co-operative Societies in Kenya. (4mks)

Four reasons that have led to the growth of the savings and credit co-operative societies in Kenya.

Because they enable people to save according to their abilities
They offer different types of loans to meet the needs of the members.
They charge relatively low rates of interest for loans borrowed.
They offer easy lending conditions with few formalities involved in the application for the loan.
The government supports their establishment so as to empower the people.
The members enjoy profits made by the co-operative in terms of dividends.
Members have a sense of ownership of the co-operative since they manage it themselves.
A loan is written off in case a member dies before he is through with repayments, unlike the case with other financial institutions, which will continue to demand payment.
The co-operative give the beneficiaries double a member’s savings if he dies while still a member.

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Highlight four benefits that may be derived from an efficient road transport system in the country.

5/11/2021

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Highlight four benefits that may be derived from an efficient road transport system in the country. (4mks)

Four benefits that may be derived from an efficient road transport system in the country.

Workers are able to get to work and back to their homes in good time.
Ease in the delivery of raw materials to industries and finished goods to the market.
Reduced cost of transportation, which may lead to a decrease in the price of goods.
Low maintenance costs of motor vehicles since the vehicles do not break down oftenly.
Easy access to Auxiliary services, like banks and insurance.
Buyers and sellers are able to move easily from one market to another.
Goods can easily be moved from an area with excess supply to an area with a shortage.
Helps in the stabilization of prices since goods are availed in the market at all times.
Help to ensure that there is a steady supply of goods in the market at all times.
Helps to widen the market since many parts of the country are accessible.

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State four problems the consumers encounter in the process of satisfying their wants

5/11/2021

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State four problems the consumers encounter in the process of satisfying their wants. (4mks)

Problems the consumer encounter in the process of satisfying their wants.

Human wants are un-limited/endless and cannot be satisfied with the limited natural recourses. Hence, consumers are faced with the problem of choice.
The recurrent nature of their wants. Hence, the consumer has to keep satisfying them as they arise.
The changing nature of wants renders the consumer unable to satisfy new emerging wants.
The complementary nature of wants makes it not easy to satisfy one want leaving out the other to be satisfied later .
The competitive nature of some human wants makes it difficult for the consumer to decide which want to be satisfied first and which will follow.
Limited resources do not match the many human wants/few resources available to satisfy the many wants.
Increases in prices of goods lower the purchasing power of many consumers.

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Explain five features of oligopoly.

​The following trial and balance relates to business of Mali Ngumu traders as at 30th June 2008.

​Required:

(a) Prepare a trading profit and loss account as at 30th June 2009. ​ (8mks)

​(b) Calculate the following ratios:- (4mks)

​(i) Rate of return on capital

​(ii) Margin

​(iii) Quick ratio

​(iv) Rate of stock return over

​Explain four ways in which man uses clothing to satisfy his wants (4mks)

Most countries in the world are under-developed. Give six characteristics of these countries (12mks)

​Discuss four factors that determine the level of a country’s national income (10mks)

​Give five contributions of commercial banks in Kenya (10mks)

​Explain five importance of an efficient transport system in a country (10mks)

Describe six causes of unemployment in Kenya (12mks)

Briefly explain the meaning of the following forms of advertising (8mks)

​(i) Celebrity advertising

​(ii) Product advertising

(iii) Informative advertising

​(iv) Institutional advertising

Discuss five strategies that can be used by the government to control inflation (10mks)

​Discuss five advantages of a bonded warehouse (10mks)

​Explain five external factors that influence the success of a business. (10mks)

Name four types of marine insurance policies. (4mks)

​Describe the following types of unemployment:

​(i) Disguised unemployment (2mks)

​(ii) Seasonal unemployment (2mks)

​List four factors that are likely to hinder economic development in Kenya. (4mks)

Name four possible barriers to international trade. (4mks)

Outline four ways in which the Central Bank controls the operations of commercial banks. (4mks)

​List four advantages of credit sales to a seller. (4mks)

State four consequences of eliminating wholesalers from the chain of distribution. (4mks)

​Outline four main functions of an office in any business organization. (4mks)

Highlight four factors that may hinder the expansion of small scale business enterprises. (4mks)

State four limitations of billboards as a tool of product promotion. (4mks)

​Outline four reasons that have led to the growth of the savings and credit Co-operative Societies in Kenya. (4mks)

Highlight four benefits that may be derived from an efficient road transport system in the country. (4mks)

​State four problems the consumers encounter in the process of satisfying their wants. (4mks)

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The following trial and balance relates to business of Mali Ngumu traders as at 30th June 2008.

Required:

(a) Prepare a trading profit and loss account as at 30th June 2009. (8mks)

(b) Calculate the following ratios:- (4mks)

(i) Rate of return on capital

(ii) Margin

(iii) Quick ratio

(iv) Rate of stock return over

Explain four ways in which man uses clothing to satisfy his wants (4mks)

Discuss four factors that determine the level of a country’s national income (10mks)

Give five contributions of commercial banks in Kenya (10mks)

Explain five importance of an efficient transport system in a country (10mks)

(i) Celebrity advertising

(ii) Product advertising

(iv) Institutional advertising

Discuss five advantages of a bonded warehouse (10mks)

Explain five external factors that influence the success of a business. (10mks)

Describe the following types of unemployment:

(i) Disguised unemployment (2mks)

(ii) Seasonal unemployment (2mks)

List four factors that are likely to hinder economic development in Kenya. (4mks)

List four advantages of credit sales to a seller. (4mks)

Outline four main functions of an office in any business organization. (4mks)

Outline four reasons that have led to the growth of the savings and credit Co-operative Societies in Kenya. (4mks)

State four problems the consumers encounter in the process of satisfying their wants. (4mks)