Eagle Play sets estimates a 60% probability that sales of play sets in the summer of 2019 will be 45,000 units, about the same as in 2018.They believe there is a 20% probability that they will be more popular due to its new exclusive line, and potential sales would be 90,000 units.There is also a 20% probability that restrictive zoning ordinances will limit sales to 30,000 units.The expected unit sales of the play sets are
A)55,000
B)51,000
C)67,500
D)60,000

Question

Quizplus · Accepted Answer

The expected unit sales can be calculated using the formula for expected value: $E(X) = p_1x_1 + p_2x_2 + p_3x_3$, where $p_i$ is the probability of each outcome and $x_i$ is the value of each outcome. Thus, $E(X) = 0.6(45,000) + 0.2(90,000) + 0.2(30,000) = 27,000 + 18,000 + 6,000 = 51,000$.

Eagle Play Sets Estimates a 60% Probability That Sales of Play