# Data Management - Prob. Distributions

• Dec 31st 2008, 12:04 PM
Faisal2007
Data Management - Prob. Distributions
A lottery ticket has a $1,000,000 first price,a$25,000 second, and 5 $1000 third prizes. a total of 2,000,000 tickets are sold. If a ticket costs$2.00, what is the expected profit per ticket ?

I tried E(x) =Sum Xi . P(xi)

I am not getting 1.48 as an answer...

If you are good at these type of questions please add me on MSN...

I have an assignment that i have troubles with...

It would be great if someone lends me some of your valuable time to help me with it.
• Dec 31st 2008, 12:34 PM
nzmathman
2,000,000 tickets will sell for $4,000,000. Now the lottery company gives away one$ 1,000,000 award, one $25,000 award and five$ 1,000 awards.

Summing these awards up, you have $1,030,000 in awards given away. So the lottery company expects to make a total of$ 4,000,000 - $1,030,000 =$ 2,970,000.

There are 2,000,000 tickets, so the expected profit per ticket is $\frac{ \2,970,000}{2,000,000}$
• Dec 31st 2008, 01:01 PM
Faisal2007
Isnt the expectation E(X) = N x P ?
• Dec 31st 2008, 01:21 PM
nzmathman
Doesn't really matter. Letting X = the amount a ticket buyer wins,

$E(X) = \ 1,000,000 \times \frac{1}{2,000,000} +$ $\ 25,000 \times \frac{1}{2,000,000} + \ 1,000 \times \frac{5}{2,000,000} = \ 0.515$

Now, if the ticket buyer payed $2 and can expect to win$0.515, this means the lottery company expects to make the rest from every ticket sold (i.e. $2 -$0.515 = \$1.485)

This gives the same result as my first post.
• Dec 31st 2008, 04:01 PM
mr fantastic
Quote:

Originally Posted by Faisal2007
$E(X) = \sum_{i = 1}^{\infty} x_i \cdot \Pr(X = x_i)$.