# june 2011 no.1 (decision making under condition of uncertainty)

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• #54196

samanthasteinier
Participant

(a) Pay off table
no ogf bags
\$350000 \$280000 \$200000
WEATHER
good (\$000) \$1750 1400
average \$1085 1400
poor \$325 640

(1) 350,000 x \$5 = \$1,750,000
(2) [280,000 x \$5] – [70,000 x \$(4·50)] = \$1,085,000 etc

HOW IS \$1400 OBTAINED?????????

#104494

Participant

Profit=\$9-\$4=\$5 per bag.
In case of disposal,
Loss=\$4+\$0.50=\$4.50 per bag.

If DEMAND is GOOD(350,000), but SUPPLY is 280,000
Profit=280,000*\$5=\$1,400,000

If DEMAND is AVERAGE(280,000), and SUPPLY is 280,000
Profit=280,000*\$5=\$1,400,000

If DEMAND is POOR(200,000), but SUPPLY is 280,000
Profit=(200,000*\$5)-(80,000*\$4.50)=\$640,000

Hope, u r ok now.

#104495

samanthasteinier
Participant

ah ok thanks a lot.i was not understanding the 9 possibilities obtained.the question seems to be quite confusing.

#104496