Each day, a news vendor must determine how many New York Herald Wonderfuls to or

Question

Each day, a news vendor must determine how many
New York Herald Wonderfuls to order. She pays 15¢ for each
paper and sells each for 30¢. Any leftover papers are a total
loss. From past experience, she believes that the number of
papers she can sell each day is governed by the probability
distribution shown in Table 5. How many papers should she
order each day?

TABLE 5
No. of Papers         Demanded Probability
50                                .30
70                                .15
90                                .25
110                              .10
130                              .20

Explanation / Answer

for calculating the average number of papers to be ordered each day

we should calculate the expectation of papers

E[x] =i(Di*Pi)

where Di is demand of day i

  Pi is probability od demand

E[x] =50*0.30+70*0.15+90*0.25+110*0.1+130*0.20

E[x] =85

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