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Example 1
1. I would like to know exactly why you have to multiply the probability of getting the profit for each level of uncertain normal demand
2. if you had perfect knowledge, wouldn’t you know exactly which month will be that level of demand?
3. what level of profit would you get for all the other months that does not have the expected demand?
e.g the probability of normal demand being 400 was 0.2
– so that would be only two months in a year that have an level of demand of 400, then what happens to the remaining 10 months when its not that level of demand?
Thank you sir.
But it can’t be two months in 12 months because 0.2 of 12months is not 2 months though.. its 2.4 months…
1. Because we are calculating the average profit per month.
2. With prefect knowledge the normal demand will be the same each month, but we don’t know what that demand will be until after we have paid for the perfect knowledge.
3. We are not looking at just 12 months. We are assuming it continues indefinitely not just for one year!
Have you watched the lectures working through this example?
1. so it is the average amount of times that it will be that profit when it is that normal demand?
yes i have a couple of times..
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