Answered: Demand in each period follows the same…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Demand in each period follows the same normal distribution (i.e., there is one demand
distribution that represents demand in any single period). Assuming demand is independent across periods, which of the following statements about the standard deviation of
demand over five periods is true?
a. It equals the standard deviation of demand over one period.
b. It is greater than the standard deviation of demand over one period but less than five
times the standard deviation of demand over one period.
c. It equals five times the standard deviation of demand over one period.
d. It is even more than five times the standard deviation of demand over one period.

Features Features Normal distribution is characterized by two parameters, mean (µ) and standard deviation (σ). When graphed, the mean represents the center of the bell curve and the graph is perfectly symmetric about the center. The mean, median, and mode are all equal for a normal distribution. The standard deviation measures the data's spread from the center. The higher the standard deviation, the more the data is spread out and the flatter the bell curve looks. Variance is another commonly used measure of the spread of the distribution and is equal to the square of the standard deviation.

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