School lunches are a merit good, meaning they would be under provided by the free market, since without public provision and support, millions of American children would come to school every day without nutritious meals to get them through the day (Money.cnn.com, 2014). Clearly, both "guns"" and "butter"" create benefits for society. Among the countless other goods and services the government provides or supports the provision of, the United States faces a tradeoff arising from the scarce resources at the government's disposal. Currently, the US government spends far more on its military ($660 billion in 2010!) than it does on lunches for American school children. Clearly, military spending is necessary, but it may be that in the tradeoff between these two important services more resources should be allocated towards "butter " at a period in the US economy when low income households are finding it harder than ever to provide their children with one of life's most basic necessities, nutritious food (Money.cnn.com, 2014). Real life experience related to trade off are: Only have enough cash to buy a book or a pair of jeans, but not both? That's a trade-off. Trade off happens in our day to day life as well. Sometimes you have to pick whether to studying for finals or have some fun with your friends. If you pick studying over friends then you miss out of the fun you'll be having with them. If you pick friends then you might score less in your finals.
Issue 2.
Elasticity is a measure of just how much the quantity demanded will be affected by a change in price or income or change in price of related goods.(Mankiw, 2012) Different elasticities of demand measures the responsiveness of quantity demanded to changes in variables which affect demand so:.
Price elasticity of demand: "measures the responsiveness of quantity demanded by changes in the price of the good.".
Income elasticity of demand: "measures the responsiveness of quantity demanded by changes in consumer incomes.
