Question

A pizza shop sells three sizes of pizza, and they track how often each size gets ordered along with how much they profit from each size. Let X represent the shop's profit on a randomly selected pizza. Here's the probability distribution of XXX along with summary statistics:

Small Medium Large
X= Profit($) 4 8 12
P(X) 0.18 0.50 0.32
Mean μx= $8.56
Standard Deviation σx ≈ 2.77

The company is going to run a promotion where customers get $2 off any size pizza. Assume that the promotion will not change the probability that corresponds to each size. Let Y represent their profit on a randomly selected pizza with this promotion. What are the mean and standard deviation of Y?

Answer 1

μy = $6.56 ; σy = 2.77

Explanation:

Given the data :

Mean μx= $8.56

Standard Deviation σx ≈ 2.77

Profit, Y on pizza with current promo :

Price off on pizza = $2

Y = x - 2

μx = E(x) = $8.56

μy = μ(x - 2)

μy = μx - $2

μy = $8.56 - $2

μy = $6.56

For the standard deviation of y

σx ≈ 2.77

σy = σ(x - 2)

σy = σx - 2

Constants are treated as 0 for standard deviation

σy = 2.77