high demand 80%

5. The CEO must determine whether to build a small plant or a large plant for the company. The CEO believes that the profit made will depend on the level of future demand. The payoff table (in $) is as follows: Action Large Plant Action Small Plant Probability Event 480 High Demand Low Demand 270 0.65 195 100 0.35 Before the board meeting the CEO obtained a market demand forecast report. In the past, when the demand was high, the forecast indicated high demand *0 % of the time. When the demand was low, the forecast indicated low demand for 70% of the time. The latest forecast indicates high demand. Compute the revised probablitlities with Bayes' rule now that you know that the latest forecast indicates high demand. a. b. Interpret the impact of the latest forecast on the prior probabilities. 5. The CEO must determine whether to build a small plant or a large plant for the company. The CEO believes that the profit made will depend on the level of future demand. The payoff table (in $) is as follows: Action Large Plant Action Small Plant Probability Event 480 High Demand Low Demand 270 0.65 195 100 0.35 Before the board meeting the CEO obtained a market demand forecast report. In the past, when the demand was high, the forecast indicated high demand *0 % of the time. When the demand was low, the forecast indicated low demand for 70% of the time. The latest forecast indicates high demand. Compute the revised probablitlities with Bayes' rule now that you know that the latest forecast indicates high demand. a. b. Interpret the impact of the latest forecast on the prior probabilities