JAMB Commerce 2009 Past Questions & Answers

Commerce is made up of all activities that help in moving goods from the producer to the final consumer. The main activity at the heart of this entire process is the exchange of goods and services through buying and selling, which is called trading. All other commercial activities, such as advertising, banking, and transportation, are known as aids to trade because they exist to support the central act of trading.

Common mistake: Students often mistakenly choose marketing because it is a broad concept, but marketing is a business philosophy focused on satisfying customer needs, while trading is the specific act of buying and selling at the heart of commerce.

Transportation is the aid to trade that involves moving goods and people from one place to another. It is considered to be associated with communication because it enables the physical delivery of letters and parcels, which are forms of written communication. Transportation also allows business people to travel for face-to-face meetings, which is a vital part of business communication.

Common mistake: Students may get confused because communication is also a distinct aid to trade, but they should remember that transportation supports communication by moving physical messages and people for meetings.

The work of a textile worker involves converting raw materials, such as cotton or wool, into finished products like fabric. This transformation of raw materials into more useful goods is known as manufacturing. Manufacturing is a major type of production, which is the creation of goods and services to satisfy human wants.

Common mistake: Students might mistakenly choose commercial activity because they associate textiles with buying and selling in the market, but the question focuses on the worker's service which is the actual making of the textile, not its sale.

The factors of production are the essential resources or inputs used to create goods and services. These resources are traditionally classified as land, labour, capital, and entrepreneurship. The question asks for the collective term for these resources when they are harnessed to create goods, which is precisely the definition of factors of production.

Common mistake: Students might mistakenly choose options B or C because they list some of the factors of production, but the correct answer is the collective term that includes all of them.

Primary production is the first stage of production, which involves the extraction of raw materials directly from nature. Agriculture, which includes farming and raising animals, is a perfect example because it involves taking resources from the land. The other options are examples of secondary production (manufacturing, construction) or tertiary production (banking).

Common mistake: Students might mistakenly choose 'manufacturing' because it is a major form of production, but they forget that manufacturing is secondary production, which processes the raw materials obtained from primary production.

Modern retailing refers to the current methods of selling goods directly to consumers. Supermarkets are a primary example of modern retail outlets. Branding is essential in today's market to distinguish products, and after-sales service, such as warranties and support, is a key strategy to build customer loyalty and satisfaction.

Common mistake: Students might mistakenly choose options like A or C because they include some correct elements, but they fail to recognize that 'doorstep selling' is a more traditional, not modern, form of retailing.

A chain store is a type of multiple shop because it has many branches in different locations under one brand and central management. It also shares features with a departmental store because each large branch sells a wide variety of different goods, which are often organized into separate departments like food, clothing, and electronics. Therefore, it combines the multi-branch nature of multiple shops with the wide product range of departmental stores.

Common mistake: Students may mistakenly choose option D, but a mail-order business sells goods through post without a physical shop for customers to visit, which is the opposite of a chain store.

This question is likely flawed, as 'political unrest' is an environmental problem, not a function. However, a wholesaler's function of warehousing (storing large stocks) helps to ensure a steady supply of goods to the market. This stabilizes supply even during disruptions caused by events like political unrest, making the wholesaler a buffer in the distribution chain.

Common mistake: Students might incorrectly choose option B, 'reduce prices of goods', because wholesalers buy in bulk, but this is more of a result of their activities rather than a core function like breaking bulk or warehousing.

Artificial barriers to trade are man-made rules or policies created by a government to deliberately restrict international trade. Custom duties, which are taxes on imported goods, are a perfect example of this as they are intentionally put in place to make foreign products more expensive. The other options like political unrest or culture are considered natural barriers because they are not created specifically as a trade policy.

Common mistake: Students might choose 'political unrest' because it is a significant barrier to trade, but it is considered a natural or environmental barrier, not an artificial one created specifically as a trade policy.

Commercial documents are the official papers used during the buying and selling of goods. The documents in option B are very common because they cover the key stages of a trade transaction: a letter of enquiry starts the process, an invoice requests payment, a receipt confirms payment, and a consignment note is used for delivery. These documents are essential for recording and tracking business deals.

Common mistake: Students might mistakenly choose option A as it also lists common documents, but the set in option B better represents the full sequence of a typical trade transaction from inquiry to delivery.

Although the question asks for 'Free on Board' (FOB), the correct option 'D' actually defines the term 'Cost, Insurance, and Freight' (CIF). In a CIF contract, the price the seller quotes includes the original cost of the goods, the cost of insuring them during shipping, and the freight charges to transport them to the buyer's port. The seller is responsible for paying these three things to get the goods to the port of destination.

Common mistake: Students often confuse CIF with C&F (Cost and Freight), and might wrongly choose option B which incorrectly omits the insurance component.

To find the final price, first calculate the discount amount, which is 12.5% of N50,000. This is calculated as $(12.5 / 100)$ * 50,000 = N6,250. Next, subtract this discount amount from the original price of the goods. Therefore, the buyer will pay N50,000 - N6,250 = N43,750.

Common mistake: Students might mistakenly choose the discount amount (N6,250) as the final answer instead of subtracting it from the original price.

A bank draft is a payment instrument that a bank issues and guarantees with its own funds, after taking the money from a customer's account. This makes it a very secure method of payment because the recipient is sure the funds are available. The question describes this exact process, where a bank draws a cheque on its own funds.

Common mistake: Students might mistakenly choose 'crossed cheque' because it is a familiar term, but crossing a cheque only specifies that it must be paid into a bank account and does not relate to who issues the cheque.

The question asks to classify billboards and posters, which are tools used for advertising. These items are placed in open, public spaces like roadsides and on buildings to be seen by people outside. Therefore, they are correctly categorized as outdoor media, a major form of advertising.

Common mistake: Students may mistakenly choose 'print media' because posters and billboards are printed, but this category typically refers to newspapers and magazines, whereas 'outdoor media' is the specific term for advertisements displayed outside.

Promotion is the correct answer because it is the general term for all activities a business uses to communicate with customers and encourage them to buy its products. The main tools of promotion, often called the 'promotional mix', include advertising, personal selling, and publicity. Therefore, 'promotion' is the collective name for these activities.

Common mistake: Students may mistakenly choose 'exhibition' or 'trade fair' because these are specific events where promotion happens, but they are only examples of promotion, not the overall collective term for all such activities.

The central bank, like the Central Bank of Nigeria (CBN), acts as the government's banker and the apex financial institution. One of its primary and exclusive functions is to issue a country's legal tender, which are the banknotes and coins used for transactions. While commercial banks perform many banking services, they are not permitted to print or mint currency.

Common mistake: Students might mistakenly choose other options like 'discounts bills' because commercial banks also perform this function, but they fail to recognize that issuing currency is a role performed solely by the central bank.

A current account is a type of bank account designed for frequent transactions, often used by businesses. One of its main facilities is an overdraft, which allows the account holder to withdraw more money than is in the account, up to an agreed limit. This serves as a short-term loan from the bank. In contrast, interest is typically paid on savings accounts, not current accounts, and dividends are payments from owning shares in a company.

Common mistake: Students often mistakenly choose 'interest on deposits' because they associate all bank accounts with earning interest, but this feature is characteristic of savings accounts, not current accounts.

A telegram is a communication service where the price for sending a message is determined by the number of words it contains. This is a unique feature of the telegram service. In contrast, telephone calls are typically charged based on the duration of the call, and e-mails are based on internet data usage, not the word count.

Common mistake: Students might mistakenly choose 'telephone' because a longer conversation costs more, but the charge is based on the time spent on the call, not the specific number of words spoken.

Communication is a vital aid to trade that involves the exchange of information. For telephone services to be transmitted from one country to another, a special technology is needed to send the signal over long distances, like across oceans. Communication satellites are placed in space to receive these signals from one country and relay them to another, making international calls possible.

Common mistake: Students often mistakenly choose 'internet services', but communication satellites are a more fundamental technology that enables the transmission of various signals, including internet and traditional phone calls, between countries.

Subrogation is the principle that allows an insurance company, after paying a claim in full, to step into the shoes of the insured. This gives the insurer the right to sue the third party who caused the loss in order to recover the money it paid out. This principle ensures that the insured person does not profit from the loss by being paid by both the insurance company and the person at fault.

Common mistake: Students often mistakenly choose 'contribution' because it also involves how insurers pay claims, but contribution applies when an asset is insured with multiple companies and they share the claim payout, whereas subrogation is about recovering costs from a responsible third party.

An insurable risk is a type of risk that an insurance company is willing to accept because its probability and potential financial cost can be calculated. This allows the insurer to determine a premium to charge in exchange for a promise to provide compensation if the unfortunate event occurs. The question directly describes the fundamental principle of what makes a risk insurable.

Common mistake: Students might confuse the general category with specific examples, choosing 'delivery risk' or 'credit risk', which are types of risks that can be insurable but are not the correct overall classification.

The fundamental principle of insurance is the pooling of risks. This means many people contribute small amounts (premiums) into a single fund. When an insured person suffers a loss, the fund is used to pay for it, effectively spreading the cost of the loss among all the contributors instead of one person bearing the entire burden.

Common mistake: Students often mistakenly choose option A because they think insurance stops bad events from happening, but insurance only provides financial compensation after a loss occurs, it doesn't prevent the event itself.

Transportation is the movement of goods and people from one place to another. For a business, this means it can move its finished products from the factory to different towns, cities, and even countries. By doing this, the business can sell to more customers in a wider geographical area, which is what extending its market coverage means.

Common mistake: Students might mistakenly choose option C, but while transportation is necessary to procure raw materials, the cost of transport actually adds to their price rather than making them cheaper.

Warehousing provides a safe place for manufacturers to store goods after they are produced. This allows them to make products continuously, even if demand is not immediate or is seasonal. By storing the goods, they have effectively produced them in advance of demand, ready to be sold when customers need them.

Common mistake: Students might mistakenly choose option C, 'meet the demand of customers', which is a result of warehousing, but the primary function that enables this is the ability to produce and store goods in advance.

A sole proprietorship is a business owned and managed by one person, so its finances are limited to the owner's personal savings and small loans they can secure. This makes it very difficult to raise a large amount of money, known as funds or capital, which is needed to start, run, and expand the business. Unlike larger companies, a sole proprietor cannot sell shares to raise money, making sourcing for funds their most significant challenge. While acquiring raw materials or machinery is a problem, the core issue is the lack of funds to pay for them.

Common mistake: Students may mistakenly choose raw materials or machineries, but these are things that can be bought if the business has enough funds, which is the actual root problem.