1. (a) Explain FIVE services offered by commercial banks to business people. ( I0mks)

(b) Describe FIVE factors that affect the elasticity of demand.

2. (a) Study the diagram given below which shows equilibrium of a firm and answer the questions that follow.

(i) State the market structure represented by the above diagram. [ 1 mk]

(ii) With a reason, state whether the firm is operating in the short run or long run. (lmk]

(iii) Outline FOUR features of the above market structure. (8mks)

(b) Kenya's development plans are praised world wide. Highlight FIVE problems that

hinder their implementation. [ I 0mks]

3. (a) Explain FIVE ways traders can adopt to prepare goods for sale. [ 1 0mks]

(b) Explain FIVE benefits that Kenya is likely to get from free trade. [ I 0mks )

4. (a) Describe FIVE circumstances under which limited liability companies can be

liquidated. [I 0mks]

(b) Discuss FIVE: insurance policies that a wholesaler in Lodwar town can take.

[l0mks]

5. (a) Highlight FIVE measures that a government may use to control inflation.

(10mks]

(b) Discuss FIVE causes of under employment in Kenya. [ l0mks]

6. (a) Explain FIVE circumstances under which one may use signs in communication. [I0mks]

(b) The following information has been extracted from the books of Otieno Traders on 3 Ist may, 2006.

Shs.

Salaries 15 000

Discount received 16 000

Purchases 195 000

Returns inwards 4 970

Returns outwards 3 000

Sales 268 970

Stock ( Ist June 2005) 24000

Stock (31st May 2006) 46000

Discounts allowed 5 000

Insurance 14000

Commission earned 30 000

General expenses 11 000

Mortgage loan 80 000

Additional information:

(i) Interest on mortgage loan 20% p.a.

(ii) Outstanding salaries Shs. 5 000

(iii) Prepaid insurance Shs. 4 000

Prepare:

A trading profit and loss account for the year ended 31st May 2006. [ I 0mks)

7. a) Explain FIVE benefits a person gets as a result of taking a whole life policy with an insurance company. 10mks

b) A commodity X has an abnormal demand curve and a normal supply curve. With an aid of a diagram explain the effects on the equilibrium quantity and price caused by an increase in supply. 10mks

8. a) Explain FOUR circumstances when a manufacturer would prefer promoting sales of his products using personal selling method. 8mks

b) Maendeleo Traders have the following information in their books of account on 31st December 2002.

Kshs.

Stock (01/01/2002 6,000

Sales 100,000

Return-in 2,000

Return-out 2,800

Carriage-in 1,000

Carriage-out 1,500

Purchases 88,000

Stock (31/12/2002) 4,000

Commission earned 3,500

Discount allowed 2,200

Sundry expenses 4,000

Discount received 4,400

Postage 800

Stationery 1,200

REQUIRED

(i) Prepare trading profit and loss account for Maendeleo Traders 10mks

(ii) Calculate - Mark -up 1mk

(ii) - ROSTO 1mk

9. a) Explain FIVE differences between public corporations and co-operative societies 10mks

b) Explain FIVE sources of monopoly. 10mks

10. a) Explain FIVE factors that can contribute to the expansion of firms in a given industry. 10mks

b) Highlight FIVE principles of taxation. 10mks

a) Below are the national income estimates of country Q during the year 2004.

Value in Kshs. 000,000

EXPORTS - 125,000

Consumption expenditure - 312,000

Investment - 150,000

Government spending - 208,000

Imports - 105,000

Depreciation - 5,000

Net indirect taxes - 25,000

Given that the country has a population of 30 million people,

i) Calculate the GNP per capita of the country. 4mks

ii) Outline FOUR limitations of using GNP per capita in measuring the standards of living in a country. 8mks

b) Explain FOUR services offered by wholesalers to producers. 8mks

6. a) Discuss FIVE functions of the central Bank. 10mks

b) Highlight FIVE factors that have contributed to the continued popularity of postal service in Kenya. 10mks