How many baskets should they expect to have to mark down

Assignment Help Microeconomics

Reference no: EM133486564

Case: EcoTable is a retailer of specialty organic and ecologically friendly foods. In one of their Cambridge, Massachusetts, stores, they plan to offer a gift basket of Tanzanian teas for the holiday season. They plan on placing one order and any leftover inventory will be discounted at the end of the season. Expected demand for this store is 3.5 units and demand should be Poisson distributed. The gift basket sells for $52, the purchase cost to EcoTable is $24, and leftover baskets will be sold for $16.

a. If they purchase only three baskets, what is the probability that some demand will not be satisfied? (Round your answer to one decimal place.)

b. If they purchase 10 baskets, what is the probability that they will have to mark down at least three baskets? (Round your answer to one decimal place.)

c. How many baskets should EcoTable purchase to maximize its expected profit? (Round your answer to the nearest value.)

d. Suppose they purchase four baskets. How many baskets can they expect to sell? (Round your answer to one decimal place.)

e. Suppose they purchase six baskets. How many baskets should they expect to have to mark down at the end of the season? (Round your answer to three decimal places.)

f. Suppose EcoTable wants to minimize its inventory while satisfying all demand with at least a 95 percent probability. How many baskets should they order?

g. Suppose EcoTable orders eight baskets. What is its expected profit? (Round your answer to two decimal places.)

Reference no: EM133486564

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