If Daily Demand Is Normally Distributed with a Mean of 15

question 9

Multiple Choice

If daily demand is normally distributed with a mean of 15 and standard deviation of 5,and lead time is constant at 4 days,a 90 percent service level will require how much safety stock?

• A)7 units
• B)10 units
• C)13 units
• D)16 units
• E)26 units

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Definitions:

Income Effect

The change in an individual's consumption choices resulting from a change in their real income.

Substitution Effect

The economic understanding that as prices rise (or incomes decrease), consumers will replace more expensive items with less costly alternatives.

Inferior Good

A type of good for which demand decreases when the income of the consumer increases, inversely related to normal goods.

Income Effect

The change in an individual's or economy's income and how that change will affect the quantity demanded of a good or service.