Everything else is ready: study the parts, the key terms and the quiz below.
- Part 11Turn recorded sales into an explicit simulation input
- Part 22Check the resampling method against a known fraction
- Part 33Build one two-day outcome and cost
- Part 44Repeat identical draws for four candidate levels
- Part 55Test what the answer depends on
- Part 66Reproduce the calculation and hand off the decision
Monte Carlo Simulation
Approximate an expected outcome when several uncertain inputs interact and the calculation is hard to do by hand.
In this lesson6 parts
- 01Turn recorded sales into an explicit simulation input
- 02Check the resampling method against a known fraction
- 03Build one two-day outcome and cost
- 04Repeat identical draws for four candidate levels
- 05Test what the answer depends on
- 06Reproduce the calculation and hand off the decision
Key terms
The words this lesson introduces, each in one line. The module’s glossary collects them all.
- input distribution
- The values a simulation is allowed to draw under its model: the 334 recorded daily totals of item
85123A. - zero recorded sales
- No included positive item units in this file on that date (57 days); not zero demand.
- resampling with replacement
- Each draw uses the same source values, so repeats are possible.
- Monte Carlo simulation
- Repeated random draws and outcome calculations under stated assumptions.
- Monte Carlo error
- Difference caused by using finitely many random draws under a fixed model: 30.44% simulated against 29.94% exact.
- stockout
- The simulated total exceeds the candidate stock.
- leftover
- The candidate stock exceeds the simulated total.
- assumption uncertainty
- Uncertainty about whether model inputs and rules describe the real decision; more runs do not reduce it.
Quiz 5 questions
Your first pick on each question is the one that counts, and a right one earns a coin. Getting one wrong here is how the lesson sticks.
Practice
Problems to solve in your own notebook. Each states the problem, not the steps: working out the steps is the exercise. Level A applies the lesson, B combines it with earlier ones, C stretches it.
The self-checking notebook for this lesson is Stats 3.5 (optional) · Monte Carlo simulation.
Common mistakes
What you will see when it goes wrong, why it happens, and the fix.
Where it’s used
Where this lesson’s ideas turn up in real work.