# You and your four closest childhood friends (The Fab Five, as you like to call yourselves) all

## Question:

You and your four closest childhood friends (“The Fab Five,” as you like to call yourselves) all attend the same university. Collectively, you are trying to determine the best way to organize transportation to and from your home town over the winter break; you have come up with two options:
1. Drive. While it will be cramped, your car can accommodate all five people. Operating your car will cost $0.30 per mile driven (in oil, gas, expected wear and tear of car, etc.), but this cost will be split five ways. In addition, because the 800-mile, one-way trip home will take more than 12 hours, you expect that each person will spend$20 on food and refreshments each way (i.e., the $20 cost will be incurred twice—on the trip home and on the return trip). 2. Fly. One of your friends, Amy, has found a cheap, round-trip, Internet-only fare for$169 per person. You can use the mass-transit system for transportation to and from the airport—this will cost $6 per person each way. Your parents will pick you up and drop you off at the other end. Finally, because the airline schedule calls for the trip to last 4 hours and 19 minutes (this estimate does not include travel time to and from the airport), you expect that each person will spend$5 on refreshments each way.

Required:
a. What is the per-person, round-trip cost for each option? Which option is cheaper?
b. Suppose it was just you and one friend (the “Terrific Two”) rather than you and four friends. How does this information change your answer to part (a) above? That is, what is the per-person, round-trip cost for each option? Which option is cheaper ?
c. What other factors would you consider in deciding whether to drive or to fly?
d. Is this a problem of excess demand or excess supply?

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