GIGAMIND
Folder:
113 Math
File:
113.036.02 Expected Value - example for concert promoter and weather
Expected value example for a concert promoter and the weather
A concert organizer wants to throw a concert
- Costs = $50,000
- Revenue | good weather = $200,000
- Revenue | moderate weather = $80,000
- Revenue | bad weather = $0
- P(good weather) = 20%
- P(moderate weather) = 30%
- P(bad weather) = 50%
Here's how to tell if they should go forward with the event
- E(X) = (200,000 * .2) + (80,000 * .3) + (0 * .5)
= $64,000
- $64 (expected revenue) > $50 (costs) so they should go ahead
Here's how to get the variance and standard deviation (the most likely range of outcomes)
- Variance = ((200,000 * .2)^2 * .2) + ((80,000 * .3)^2 * .3) + ((0 * .5)^2 * .5
= 5,824,000,000
- Standard Deviation = \sqrt{5,824,000,000}
= $76,315
Tags:
- statistics
- probabilities