Question 1

Explain two ways in which the barter system limited trade in early economies.


A common measure of value did not exist. It was difficult to ascertain the value of goods exchanged. It therefore would hinder trade as sometimes persons would not want to feel cheated.

A double coincidence of wants must exist for trade to take place. An individual who wishes to trade must have what other persons want to trade his goods. If this does not exist then trade cannot take place.

Question 2

State one advantage and one disadvantage of specialization.


An advantage of specialization is that it increases output.

A disadvantage of specialization is that it discourages quality work because of monotony.

Question 3

Show how two functions of money facilitate trade.


Money is a common measure of value. Persons can therefore determine the value of commodities and know how much to accept in exchange for goods and services.

Money is a medium of exchange and therefore accepted by everyone. Persons will not have difficulties to buy or sell goods and services.

Question 4

Starting a business is a lot of hard work and very costly. Why would an individual want to start a business?


An individual may wish to gain financial independence. A successful business can earn high levels of profits.

Using the skills and knowledge acquired to operate a profitable business.

Question 5

State the form of business organization that you believe is most advantageous to form.  Give two reasons why.


Choose one of the following:

Sole trader – Decisions are made quickly and there is little legal requirement to start the business.

Partnership – more capital can be raised, specialization of functions is more efficient

Limited liability Company – shareholders are not liable for the company’s debts beyond their level of investment, continuity of existence is assured.

Question 6

State two differences between the Free Market and the Planned economic systems.


In the free market economy the consumer is king i.e. the consumer determines what goods and services are to be produced based on their demand.  In a planned economy the government makes decision concerning the distribution of goods and service.

Competition in a free market economy leads to efficiency and innovation.

However, in a planned economy, the lack of competition reduces innovation and the motivation to produce quality output.

Question 7

Explain the roles of two stakeholders in business activities.


The role of the government is to monitor and regulate business activity to ensure that the consumer is treated fairly.

Employees must work efficiently to create quality goods and services.

Employees must adhere to the rules and relations of the company.

Question 8

Identify a business activity within your community and discuss two contributions of this business to your community.


Sally’s bakery produces good quality bread in various sizes to meet the requirements of customers. The prices are also very affordable. The bakery makes it convenient for community members as they do not have to travel a far distance to obtain this product.

Sally’s bakery also employs persons from the community. The bakery is very popular, and so workers are paid an adequate salary to support their family.

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