Laws of Expected Value (Q2f)
Your textbook can be confusing when it tries to explain the Laws of Expected Value. It’s easier to understand what’s happening if you think about them as the Laws of THE NEW Expected Value. I explain in more detail in this video.
Laws of Expected Value
- E(c) = c
- E(X + c) = E(X) + c
- also… E(X – c) = E(X) – c
- E(cX) = cE(X)
- also… E(X/c) = (1/c)E(X)
Test your understanding:
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Question 1 of 2
1. Question
Given that X is a discrete random variable, then the laws of expected value and variance can be applied to show that E(X + 5) = E(X) + 5
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Question 2 of 2
2. Question
Monthly sales have a mean of $25,000.
Profits are calculated as 30% of sales, minus fixed costs of $6,000.
The mean monthly profit will be:
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