Suppose that next year the u. s. will be in one of the following economic conditions: boom, moderate growth, recession, or depression. the probability that each economic condition will occur, and that a jewelry store will earn profits within that broader economic condition are listed below:
economic condition probability store profits
boom 0.4 $ 400,000.00
moderate growth 0.3 $ 300,000.00
recession 0.2 $ 100,000.00
depression 0.1 $ (500,000.00)
the expected profit of the jewelry store during the next year is?

The expected profit of the jewelry store during the next year is  $320,000.

Suppose that next year the U.S. will be in one of the following economic conditions: Boom, Moderate Growth, Recession, or Depression. The probability that each economic condition will occur, and that a jewelry store will earn profits within that broader economic condition are listed below:

Economic Condition, Probability, Store Profits

The expected value of a discrete random variable is the average of all possible values weighted by the probability of each outcome

A discrete random variable takes a finite set of possible values. For example, flipping a fair coin produces only two possible outcomes.

The expected profit for the store is sum of expected profit in each economic condition.

Therefore the expected profit of the jewelry store during the next year is $320,000.

Grade:  9

Subject:  business

Chapter:  economic conditions

Keywords: Boom, Moderate Growth, Recession, Depression, The expected profit