Demand Levels


Martin Stevens, the manager of a downtown stationary shop must   decide how many cartons of Valentines cards to order for the 2019 holiday.  Martin has estimated demand will be 40, 80, or 120   cartons and   has to decide whether to order 40, 80, or 120 cartons from his supplier. Each   carton costs the shop $4.25 and will be sold for $10.00. Any unsold cartons   will be sent back to the supplier and Martin will receive a $2.00 refund for   each carton that he returns to the supplier.   Past sales   and some additional research have given the following probability estimates   for demand levels:   40 cartons,   0.30; 80 cartons, 0.40; 120 cartons, 0..30.   

a. Construct a payoff table for this problem (alternatives matching the demand levels.)  

 b. Calculate the Expected Value for each alternative.   

c. Based on your calculations, how many cartons of cards should Martin order from his supplier?    


Maria is considering to invest some money that she has inherited from her grandma. The following table gives you with the information regarding the profits of her three different investing alternatives. Based on   the table below please answer the following questions:  

 a. What decision would maximize expected profits?   

b. What is the maximum amount that should be paid for a perfect forecast of the economy?     

Decision Alternative Good Economy Poor Economy   Stock market 80000 -20000   Bonds 30000 20000   CDs 23000 23000   Probability 0.5 0.5  


The population, P, in millions, of Ethiopia was 72.5 million in 2004 and growing at an annual rate of 2.5%. Let t be time in years since 2004. (a) Express P as a function in the form P=P0 a^t. P= (b) Express P as an exponential function using base e rounding the continuous growth rate to five decimal places. (c) Compare the annual and continuous growth rates.

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