The manager of a boat renting company sees the weather forecasts for tomorrow.
It claims that the probability it will rain is 0.25
The probability that it will be cloudy and not rain is 0. 5
The probability that it will be sunny is 0.25
The Managers previous experience is such that during rainy days his profit is 0.
During cloudy days his profit is $50, and during sunny day his profit is $200
What is his expected profit for tomorrow?
Have you ever seen a formula like this before? Have you seen examples (in textbook or class notes) of this sort of formula? Do you know how to use this formula?
I'm not going to do the work here. You need to start thinking.
E(Profit) = (Profit) x Pr(Profit)
so if i calculate it for each scenario
i.e if its going to rain then...
E (Profit) = $0 * 0.25
if its going to be cloudy then...
E (Profit) = $50 * 0.5
if its going to be sunny then...
E (Profit) = $200 * 0.25
i still dont see how that gives me his expected profit for tomorrow if there are 3 different scenarios.