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Monte Carlo Simulation

Unsolved
Prob. and Stats

Difficulty: 2 | Problem written by tanveer
Monte Carlo simulation is used to make an estimate about a parameter when there is uncertainty involved in it.

The process in simple terms involves the calculations by considering all the possible outcomes of an input whose value remains uncertain otherwise. This problem is designed to make the process of Monte Carlo Simulation clear in a simple possible manner.

Given the possible demand values for a company in a list, what is the expected annual profit that the company may earn?

Annual Profit = Annual demand * (Price/unit - Cost/Unit)

Here, the demand is presented as a list of values. But in practical scenarios, the uncertain input (like demand) is taken from a probability distribution e.g. a normal distribution

 

 

Sample Input:
<class 'list'>
demand: [100, 120, 130, 115, 150, 132]

Expected Output:
<class 'float'>
2490.0

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numpy has been already imported as np (import numpy as np)