Question

. A man has the choice of running either a host-snack stall or an ice-cream stall at a sea side resort during the summer season. If it is a fairly cool summer, he should make Rs. 5000 by running the hot-snack stall, but if the summer is quite hot, he can only expect to make Rs. 1000. On the other hand, if he operates the ice-cream stall, his profit is estimated at Rs. 6500, if the summer is hot, but only Rs. 1000 if it is cool. There is a 40 per cent chance of the summer being hot. Should he opt for running the hot-snack stall or the ice-cream stall. Give mathematical argument.

Answer 1

Answer:

The investment cost from ice cream is significantly smaller than the hot dog shop, the man could perhaps opt for something like a hot dog stall.

Step-by-step explanation:

The given values are:

Percentage of being hot summer,

= 40%  

i.e,

= 0.4

So that,

The percentage of being cold,

= 1 - 0.4

= 60%

Now,

From hot dog, the expected profit will be:

⇒ $5000\times P(cold \ summer) + 1000\times P(hot \ summer)$

On putting the values, we get

⇒ $5000\times 0.6+1000\times 0.4$

⇒ $3400$

From ice-cream stall, the profit will be:

⇒ $6500\times P(hot \ summer)+1000\times P(cold \ summer)$

On putting the values, we get

⇒ $6500\times 0.4+1000\times 0.6$

⇒ $3200$

So the above is the right response.