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Suppose that a grocery store buys milk for $2.10 and sells it for $2.60. If the milk gets old then the grocery store can sell their unsold milk back to their wholesaler for $0.60 (so the grocery store loses $1.50 on each gallon that it has to sell back to the wholesaler). Suppose that the demand for milk is normally distributed with a mean of 2500 gallons per week and a standard deviation of 400 gallons per week. The grocery store needs to decide how much milk to order. They decide that they want to order an amount of milk such that their expected profit on the last gallon sold is 0. Therefore, if p denotes the probability of selling a gallon of milk (notice that the probability of selling a gallon of milk is related to the number of gallons of milk because the demand for milk is normally distributed) then the expected profit is p (.50) + (1-p) (-1.50). If we set this equal to 0 and solve for p then we get p = .75. Therefore, if the grocery store's goal is to maximize its expected profit then they should order an amount of milk such that the probability of selling that amount of milk (or more) is 75%. How many gallons of milk should the store order?
Explain the economy automatic stabiliser A budget deficit is shortfall between a government's tax revenue and its spending in a given year. If a government runs a budget defici
Explain whether the following statements are true or false: a) The long run aggregate supply curve is vertical because economic forces do not affect long run aggregate supply.
Suppose arm's demand curve is given by P = 120? Find the (value of) price elasticity of demand (point elasticity) for the demand curve when the price is $100. Is demand elastic or
outline two main restrictions by indian government applied to import. Using the data from your case study analyse and explain who would benefit directly and who would lose directly
Q. Discuss about the factors affecting the Price Elasticity of Demand. a. Availability of Substitute- Availability of close substitute is important determinants of elasticity of
Privatization is the move of ownership from the public sector (government) to the private sector (business).
Compute the mean and variance of the following discrete probability distribution. Where X=2, and P(x)=.5. Where X=8 and P(X) .3. Where X=10 and P(X) =.2.
1. Assume the required reserve-deposit ratio is 12%, and the currency-deposit ratio is 38%. How much would money supply change if the Fed made open market purchases of $100 millio
Researchers have put forth various theories to explain the observed widening of the income distribution in the United States over the past four decades. First, there has been a sh
Explain about the nominal Gross domestic product It isn't very common to use CPI in construction of real GDP. The reason is that CPI measures the price evolution of consumer go
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