- #1

megr_ftw

- 71

- 0

X=demand for the magazine with pmf

x | 1 2 3 4

p(x)| .1 .2 .4 .3

Shop owner pays $1.00 for each copy of mag. and charges $2.00. If mags. left at end of week are not worth anything, is it better to order two, three, or four copies of the mag.?

I know i need to introduce the random variables:

Y_k = # of mags. sold

R_k= the net profit if k mags are ordered.

I am NOT trying to just get the answer out of someone, I just need advice on how to start this..

Do I need to make another pmf for Y_k and R_k? Or do I need to figure out expected value.

just a hint may help me understand this problem