FORM 3 BUSINESS STUDIES
MARKING SCHEME
1. Why an individual engage in a business. 
•	Provision of goods and services
•	Provision of employment
•	Exploitation of economic resources
•	Exploitation of individual creativity
•	To earn profit
	To be self reliant and independent. 
2. Why a new business may fail.
•	Inadequate / lack of capital funds
•	Poor / inappropriate marketing / poor strategies.
•	Stiff/ unfair competition.
•	Lack of inadequate / inefficient / poor management skills.
•	 Lack of inadequate use of technology
•	Unfriendly / poor government policies
•	Lack of market
•	Political instability
•	Poor customer relations
3. Benefits of SACCOS
•	Encouraging members to save by making regular contributions
•	Provide loans at low interest rate to members.
•	Education to members
•	The loans are based on members' contributions
•	Some SACCO's have front office services.
•	They give dividends to members.
4. Principles of insurance.
•	Utmost good faith " Uberima Fides "
•	Insurance interest
•	Contribution 
•	Subrogation
•	Indemnity
•	Proximate cause
5. Factors for the shift in supply.
•	A fall in the cost production
•	Fall in price of competitively produced goods.
•	Technological improvement.
•	Conducive natural factors eg Good weather  season.
•	Favored Government policies e.g Tax
•	Future expectation of fall in price of the commodity.
•	Increase in factors of production 
•	Longer time.
•	Less strikes
6. Why firm may remain small
•	The target market is small
•	Limited production capacity.	
•	Nature of the product offered.
•	Owner’s decision to remain small.
•	inappropriate technology.
•	Small capital
•	Belief that small firms are easily manageable.
7. Factors labeled 1 - 4 in two sector economy;
1.	Factors of production.
2.	Payment for factors of production
3.	Expenditure on goods and services
4.	Sale of goods and services
                                     	Anesta Traders
                                   Balance sheet
  As at 30th June 2019
	Assets							Capital + Liabilities
	Fixed Assets		sh.						  sh.
	Machinery 		450,000			Capital			550,000
	Current Assets					Long term Liabilities	
	Stock			 60,000			5 year loan		270, 000
	Debtors		120,000			Short term liabilities
	Bank			180,000			Creditors		  60,000
	Cash			 70,000						_______
				880,000						880,000
9. Four types of unemployment;
a.	Seasonal unemployment is the type of unemployment caused by seasonal variations such that during the peak period, there is high demand for labour and during off peak the demand for labour declines.
b.	Frictional unemployment is kind of unemployment occurs when people lose jobs and go looking for new ones. People often spend time looking for new jobs.
c.	Cyclical unemployment occurs repeatedly at similar times. In this case a country goes through cycles of economic activities alternating from boom to recession.
d.	Involutary unemployment occurs when people are actively looking for jobs at the existing wage rate but cannot get them.
10.				Mwangi traders
				Balance sheet
  				As at 31st January 2020
	Assets						Capital + Liabilities 
	Fixed Assets					       Capital			82,500
	Land		82,000			                Long term  liabilities
	Furniture	61,500		143,500		10 years Bank loan	165,000
	Current  Assets					Short term liabilities
	Stock		18,600
	Debtors	17,700				       Creditors   34,100
	Bank		91,000			
	Cash		10,800		138,100			              --------------
					281,600					281,600