A company which sells two different models of an item finds

A company, which sells two different models of an item, finds 65% of its customers buy the cheaper model, for $95. The remaining 35% of the customers pay $125 for the more expensive model. What is the expected purchase price?

Solution

Cheaper model    95 dollars    -- customers -- 65%

Expensive model   125 dollars                         35%

Hence expected purchase price

= sum of price x prob

= 95(0.65)+125(0.35)

= 61.75+43.75= 105.50