Break-Even Analysis: Revenue is income a business receives from the sale of goods or services. The cost of operating a business is the money needed to produce goods or render services to customers. The cost is usually the sum of the fixed cost and the marginal cost. Profit is defined as the difference of revenue and cost (i.e. P = R - C). We say a new business is at the break-even point when the (accrued) operating profit equals the start-up cost of the business. Example 1: Sean decides to go into business delivering newspapers on his bicycle. He spends $500 to purchase a bicycle and each newspaper costs him $0.25. He decides he will sell the newspapers for $1.5. (a) Let be the number of newspapers Sean can sell (assume he only buys as many as he can sell). Write an expression for (), () and () (the cost, revenue, and profit functions). Hint: The cost function should include the fixed and marginal cost! (b) Use the profit function constructed in part (a) to determine the number of papers Sean must sell to break-even. Equilibrium: Recall we say the market is at equilibrium when supply = demand. In the following example we will construct a linear demand function AND use it to find the equilibrium point! Example 2: Suppose the demand for a certain wristwatch is =500 watches when the price is = $100 per watch and we also know the demand is =600 when the price is =$70. (a) Assume the demand equation is linear. Use the above information to construct the demand equation. This means write =+. (b) Assume the supply equation is given by =()=2+20. Find the equilibrium point