QUESTION ONE (THIRTY MARKS)
An individual is planning to take a trip between the downtown area of two cities, \( A \) and \( B \), which are \( 650 \mathrm{~km} \) apart. There are three options available: Travel by air. This trip will involve driving to the airport near city A, parking, waiting at the terminal, flying to airport B, walking to a taxi stand, and taking a taxi to the final destination. Travel by auto. This trip will involve driving 650 \( \mathrm{km} \) through several congested areas, parking in the downtown area, and walking to the final destination. Travel by rail. This trip will involve taking a cab to the railroad station in city A, a direct rail connection to the downtown area in city \( \mathrm{B} \), and a short walk to the final destination. Since this is a business trip, the person making the trip is willing to pay up to Kshs. 25 for each hour of travel time reduced by a competing mode. (For example, if one mode is two hours faster than another, the traveller is willing to pay Kshs. 50 more to use the faster mode.) After examining all direct costs involved in making the trip by air, auto, or rail (including parking, fuel, fares, tips, and taxi charges) the traveller concludes that the trip by air will cost Kshs. 250 with a total travel time of five hours, the trip by auto will cost Kshs. 200 with a total travel time of eight hours and the trip by rail will cost Kshs. 150 with a total travel time of 12 hours. Which mode is selected based on travel time and cost factors alone? What other factors might be considered by the traveller in making a final selection?
