Question: Using this information, model Smalltown's weather as a Markov chain. ( 3 0 pts ) ( 3 0 pts ) Consider an inventory model in

Using this information, model Smalltown's weather as a Markov chain. (30 pts)
(30 pts) Consider an inventory model in which the replenishment of stock takes place at the end of periods labelled n=0,1,2,dots, and we assume that the total demand for the single commodity during period n is a random variable Dn, independent of the time period. Assume that P{Dn=0}=.1,P{Dn=1}=.2,P{Dn=2}=.7. Assume that an (S,s) policy is used: If the end-of-period stock is less than or equal to s, then an amount sufficient to increase the quantity of stock on hand up to the level S is immediately ordered; otherwise, no new stock is ordered. Assume that S=2,s=-1. Let xn denote the quantity on hand at the end of period n, just before restocking. A negative value of xn is interpreted as an unfilled demand that will be satisfied immediately upon restocking. This is the inventory example we studied in class; recall that {xn,n0} is a Markov chain. Draw one-step transition matrix. (30 pts)
Consider the mood of an individual is considered as a three-state Markov chain having a transition probability matrix.
 Using this information, model Smalltown's weather as a Markov chain. (30

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