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.