Expected Value and Standard Deviation
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Myers Business Systems is evaluating the introduction of a new product. The
possible levels of unit sales and the probabilities of their occurrence are given
below:
Possible Sales
Market Reaction in Units Probabilities
Low response . . . . . . . . . . . . . 20 .10
Moderate response . . . . . . . . . 40 .30
High response . . . . . . . . . . . . . 55 .40
Very high response . . . . . . . . . 70 .20
a. What is the expected value of unit sales for the new product?
b. What is the standard deviation of unit sales?
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Solution Summary
Expected value and standard deviation are investigated.
Solution Preview
a. The expected value of the unit sales is
E(X) = 20*0.10 + 40*0.30 + 55*0.40 + 70*0.20 = 50
b. ...
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