How to make use of critical elasticity of demand analysis

Reference no: EM13212398

The inverse demand function for a product is given by P = 9 - 2Q. The firms producing this product are proposing to merge into a single firm. Marginal cost is 3 per unit. The pre-merger price is 5. Suppose that the "Small but Significant and Nontransitory Increase in Price" threshold is 5%. Making use of critical elasticity of demand analysis, do the existing producers of this product represent an antitrust market, or do additional substitutes need to added to the market.

Reference no: EM13212398

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