Probability distribution of building the restaurant in a business district. 1 000 000 .80 Profit (x) |-2 000 000 P(x) .20 Probability distribution of building the restaurant in front of a school. Profit (x) 500 000 -2 000 000 P(x) .95 .05 Based on the probability distributions, where should they build the restaurant?
Continuous Probability Distributions
Probability distributions are of two types, which are continuous probability distributions and discrete probability distributions. A continuous probability distribution contains an infinite number of values. For example, if time is infinite: you could count from 0 to a trillion seconds, billion seconds, so on indefinitely. A discrete probability distribution consists of only a countable set of possible values.
Normal Distribution
Suppose we had to design a bathroom weighing scale, how would we decide what should be the range of the weighing machine? Would we take the highest recorded human weight in history and use that as the upper limit for our weighing scale? This may not be a great idea as the sensitivity of the scale would get reduced if the range is too large. At the same time, if we keep the upper limit too low, it may not be usable for a large percentage of the population!
Solve for mean, variance and standard deviation.
A company is deciding where to place a restaurant that they are planning to build. They can build it on a center of a business district so they can charge higher but needs to compete with more restaurants nearby. They can also build it in front of a school where they have to charge less but they have less to compete with. The company analysed how those considerations will affect earning and they have presented their finding using a probability distribution.
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