stochastic

Example 5.5 A store must decide how much of a certain commodity to order so as to meet next month's demand, where that demand is assumed to have an exponential distribution with rate 2. If the commodity costs the store c per pound, and can be sold at a price of s > c per pound, how much should be ordered so as to maximize the store's expected profit? Assume that any inventory left over at the end of the month is worthless and that there is no penalty if the store cannot meet all the demand