You have a retail-clothing store for fashion items. For simplicity, let us consider just one gown in this question. You have to purchase your inventory at the start of the season at $60 per gown, and you plan to sell it $100. You have a 50% chance of selling more than 10 gowns.
If you have to literally throw out unsold gowns at the end of the season, how much inventory will you order?
However there is an active post-season sales market where you can sell gowns for $B (B stands for ‘bargain’ sales). Plot on a graph the number you should order for values of B from $0 to $50.