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Young's bookstore places orders for all of the latest books and then distributes them to its individual bookstores. Young needs a model to help it order the appropriate number of any title. For example, Young's plans to order a popular new hardback novel, which it will sell for $30. It can purchase any number of this book from the publisher, but due to quantity discounts, the unit cost for all books it order depends on the number ordered. If the number ordered is less than 1000, then the unit cost is $24. After each 1000, the unit cost (cost per book) drops to: $23 for at least 1000 copies; $22.25 for at least 2000 copies; $21.75 for at least 3000 copies; and $21.30 for at least 4000 copies. For example, if Young's order 2500 books, its total cost is 2500*$22.25 = $55,625. Young's is uncertain about the demand for this book - it estimates that demand could be anywhere from 500 to 4500. Also, as with most hardback novels, this one will eventually come out in paperback. Therefore, if Young's has any hardbacks left when the paperback comes out, it will put them on sale for $10, a price at which Young's believes all the leftovers will be sold.

Model of expected demands
Demand	500	1000	1500	2000	2500	3000	3500	4000	4500
Probability	0.025	0.05	0.15	0.25	0.25	0.15	0.07	0.04	0.015

Question 1. At what order quantity is the maximum profit expected to occur given the probabilities for demand?

Question 2. For a demand of 2000, what order quantity will result in a break-even profit? What will happen if more than this quantity is ordered? Hint: Use goal seek

Question 3. For what order quantity does the maximum profit occur when the probabilities for the possible demand values are all equal?

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