1) a. If we do not have scarce resources, will we have a law of demand? Will we observe price rationing for goods?

The law of demand states the relationship between quantity demanded and price, showing that the lower the price, the higher the demand and vice versa. If we do not have scarce resources, there will still be a law of demand, because all humans are greedy. This means that we will always want more of what is there and demand always initially exceeds supply, but supply will then catch up, and over time will fall behind again, although this ‘bottlenecking' is always temporary. This can be seen in fibre optic cables, as they catapulted the amount of information able to be transferred by 100 times at once, however, society still demands bigger and faster amounts.

With this, we will still observe price rationing, as we are so greedy that we want to have as much money as humanly possible, unless the resource that is not scarce is actually our money.

b. The Council of a large university, after considering two sites for building a new sporting complex, chose to build on a plot of land the university already owned rather than on another tract of land that the university would have to buy. The reason given was that the chosen site lowered the cost of the sporting complex because the land was free, whereas the other site would cost over $3 million. Analyse this reasoning.

This example is an example of an opportunity cost. They could have spent $3 million on a block of land that could have possibly been better than the one they own, or they could use that $3 million dollars on some other part of the university. Using the free land is a good idea because it frees up money that could be used to build and improve the sporting facilities, or could be put into more important parts of the university. Overall, using the free land will provide maximum