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Tradeoffs and Price Elasticity of Demand

             Trade-off is an exchange of one thing in return for another, especially relinquishment of one benefit or advantage for another.The basic economic concept of the production possibilities curve is to illustrate the relationship between a nation's decision to invest in military goods versus civilian goods. The model typically includes two "products " that a nation can choose to invest in: guns and butter (Thirunageswaram, 2009). The specific goods themselves are not so important, rather what they are meant to represent: the tradeoff any nation faces between allocating more of its scarce resources towards national defence versus goods and services that benefit the nation's consumers (Mankiw, 2012), (Shmoop, 2014).
             Today the United States faces a very real version of the old "guns vs. butter " model. Rising global food prices have put public school districts in a bind: how to feed kids nutritious meals as the prices ingredients has risen at unprecedented rates.Unfortunately, federal funding for school lunches has increased at a much slower rate than cost to districts of providing those meals. The current federal reimbursement program is based on household incomes; the poorest American students receive $2.47 of federal funding towards their "free lunches ", while students from the highest income bracket only receive $0.23 per meal. The problem is, the average school lunch now costs $3.10, so these days no one is actually receiving a "free lunch ", not even the poorest American students. This article illustrates the concept of tradeoffs as shown in the production possibilities curve. Society must allocate its scarce resources towards the goods and services it deems most desirable based on the needs of its citizens. Complications arise in this basic model, however, when government is involved (Money.cnn.com, 2014). .
             The commitment to subsidising school lunches is based on the idea that if the responsibility of feeding American school children were left to the free market, resources would surely be under allocated towards nutritious meals, representing a market failure.

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