2. You've decided to buy used books at the end of the Fall semester to sell to spring students. You've done some research and found that the textbook requirements for Econ 101 rarely change, so you've decided to buy books from current students in that course. Currently 1000 students are taking the course, so you're confident you'll be able to buy at least 200 books by handing out flyers and posting on a course GroupMe site. You've decided to pay $15 per book and sell them for $30. Any books you don't sell will be donated for shipment to a university in Africa and have no residual value to you. Your estimates of demand are given in the following table. 0 25 50 Demand (Books) Probability .0 .40 .20 75 .20 100 .20 a. Complete a payoff table that accurately reflects this situation. b. Determine the expected value, maximum loss and maximum gain for each of the options. c. Indicate how many books you'll try to buy and why.

Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
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2. You've decided to buy used books at the end of the Fall semester to sell to spring students. You've
done some research and found that the textbook requirements for Econ 101 rarely change, so you've
decided to buy books from current students in that course. Currently 1000 students are taking the
course, so you're confident you'll be able to buy at least 200 books by handing out flyers and posting
on a course GroupMe site. You've decided to pay $15 per book and sell them for $30. Any books you
don't sell will be donated for shipment to a university in Africa and have no residual value to you.
Your estimates of demand are given in the following table.
0
25
50
Demand
(Books)
Probability
.0
.40
.20
75
.20
100
20
a. Complete a payoff table that accurately reflects this situation.
b. Determine the expected value, maximum loss and maximum gain for each of the options.
c. Indicate how many books you'll try to buy and why.
Transcribed Image Text:2. You've decided to buy used books at the end of the Fall semester to sell to spring students. You've done some research and found that the textbook requirements for Econ 101 rarely change, so you've decided to buy books from current students in that course. Currently 1000 students are taking the course, so you're confident you'll be able to buy at least 200 books by handing out flyers and posting on a course GroupMe site. You've decided to pay $15 per book and sell them for $30. Any books you don't sell will be donated for shipment to a university in Africa and have no residual value to you. Your estimates of demand are given in the following table. 0 25 50 Demand (Books) Probability .0 .40 .20 75 .20 100 20 a. Complete a payoff table that accurately reflects this situation. b. Determine the expected value, maximum loss and maximum gain for each of the options. c. Indicate how many books you'll try to buy and why.
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