To find the expected profit from a probability demand distribution, we start by calculating the profit for a given level of output and then accounting for the probability of that output being sold. In your example, we have:
- Revenue per TV set: $5
- Cost per TV set: $2
- Demand: 200 TV sets
- Probability of demand: 0.1 (or 10%)
First, let’s find the profit per TV set:
Profit per TV set = Revenue – Cost
So, Profit per TV set = $5 – $2 = $3
If demand is 200 TV sets, then the total profit if all units are sold would be:
Total Profit = Profit per TV set × Number of TV sets
Total Profit = $3 × 200 = $600
However, since the probability of selling 200 TV sets is only 0.1, we need to find the expected profit:
Expected Profit = Total Profit × Probability
Expected Profit = $600 × 0.1 = $60
Thus, the expected profit from producing 200 TV sets, given the provided probabilities and costs, would be $60.