Week 2 Discussion Questions
1. Consider the following scenario and address the questions that follow.
Suppose your company wanted to determine the amount of sales of a new SUV model, called Lightning. The sales estimate would be based on the overall demand of various SUV model types. Overall demand is assumed to be normally distributed with a mean of 3 million units and standard deviation of 500,000 units. The share of demand that Lightning will take is assumed to be 4%. After running 1,000 simulated scenarios, a 95% confidence interval was constructed for the expected sales of Lightning units sold with limits of 93,048 and 146,964.
- If 1,000 new simulated scenarios were run, would you get the exact result? Explain why.
- Would the results be more stable if you ran 2,000 runs? Explain why.
- Is there a number of simulations that can be run so that the results do not change if you re-ran the simulations? Explain.
2. Reconsider the scenario presented in DQ 1 and address the questions that follow.
Suppose your company wanted to determine the amount of sales of a new SUV model, called Lightning. The sales estimate would be based on the overall demand of various SUV model types. Overall demand is assumed to be normally distributed with a mean of 3 million units and standard deviation of 500,000 units. The share of demand that Lightning will take is assumed to be 4%. After running 1,000 simulated scenarios, a 95% confidence interval was constructed for the expected sales of Lightning units sold with limits of 93,048 and 146,964.
- If a mean of 6 million units was used in the simulation, how would the confidence interval change? Explain.
- How would the confidence interval change if a standard deviation of 250,000 was used? Explain.
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