Question

The campus bookstore knows from the past several semesters that a certain elementary statistics book has a demand that is approximated by a normal distribution with a mean of 250 and a standard deviation of 40. They buy these books for $105 each and sell them to unsuspecting undergraduates at $222 each. All demand for this book is realized by the middle of the semester, at which point the bookstore bundles them up and sells them to a vendor in another country for $40 each. What is the probability of sale for the last book that the bookstore should purchase for sale to a student

Answer 1

0.357

Explanation:

The computation of the probability of sale for the last book that the bookstore should purchase for sale to a student is shown below

Probability is

= 1 - ((Cs ) ÷ (Cs + co))

= 1 - (($225 - $105) ÷ ($117 + ($105 - $40)))

= 1 - 0.6428

= 0.357

Here Cs represent the notional loss in the case when the demand is underestimated

And Co represent the notional loss in the case when the demand is overestimated