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.

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.

Salaries15 000

Discount received16 000

Purchases195 000

Returns inwards4 970

Returns outwards3 000

Sales268 970

Stock ( Ist June 2005)24000

Stock (31st May 2006)46000

Discounts allowed5 000

Insurance14000

Commission earned30 000

General expenses11 000

Mortgage loan80 000

Additional information:

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

(ii)Outstanding salariesShs. 5 000

(iii)Prepaid insuranceShs. 4 000

Prepare:

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

3. a) Highlight five reasons why a distributor of consumer goods would prefer to locate his or her warehouse near the consumers. 10mks b)

Explain five factors that have limited the adoption of containerisation in the transportation of goods. . 10mks

4. a) Explain five benefits that accrue to a company by using a prize winning competition to promote its products. 10mks The following transactions relate to Expert Traders for the month of may 2005. May 5: Sold goods on credit to Paul sh. 12,000 and Jane sh. 16,000 8: Bought goods on credit from Shah traders sh. 40,000 10: Purchased goods on credit from Grace sh. 34,000 and Peter traders sh. 31,050 16: Goods worth sh. 6,000 were returned to Shah traders and goods worth sh. 3,000 to Grace.

20: Goods sold on credit to Paul sh. 8,000 Tom sh, 11,000 and Joseph sh. 13,000.

26: Goods returned by Betty sh. 2000 Prepare the relevant journals. 10mks

5. (a) The following assets and liabilities relate to Manyonge a trader who does not maintain a complete set of accounts. 1998 shs. Outstanding general expenses 8,250 Creditors 32,000 Debtors 18,000 A cashbook summary extracted on the same revealed the following. Receipts Cash sales - sh 35,000 Purchase - sh.31,200 Paid creditors - 54,000 At the end of the year, the following information was available: Discount received amounted to sh. 7,600 Discount allowed shs. 2,500 Creditors sh. 25,000 Debtors shs. 23,000 Outstanding general expenses shs 10,700 Prepare: General expenses Account Total Debtors Account Total creditors Account.

(b) Outline six measures that a country may take to reduce unemployment.10mks

6. Country Z is a developing country and it intends to liberalize its economy. Discuss the effects of such a trading policy to the economy of the country. 20mks