Why are diamonds more expensive than water when you can live without diamonds but Cannot live without water?

The answer is a complicated phrase—”the law of diminishing marginal utility” —with a straightforward meaning. … “Economists tell us that the law of diminishing marginal utility dictates that consumers place a greater value on diamonds than on life-giving water.

Why do diamonds cost more than water when no one can live without water and no one really needs diamonds?

Total Utility. Subjective value can show diamonds are more expensive than water because people subjectively value them more highly. … As demand increases as well, consumers must choose between one additional diamond versus one additional unit of water. This principle is known as marginal utility.

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Why are diamonds more expensive than water even though we need water to survive?

The reason why diamonds are more expensive than water (generally speaking) is because there is a lot more water around than diamonds. If you live in America, all you need to do is turn on the faucet, and you can get as much water as you need.

Why should diamonds be priced so high and water be priced so low even when water is essential to sustain life which diamonds are not?

Diamonds are high-priced because the demand is high relative to the limited quantity available. Water is inexpensive because it is typically fairly abundant, but if one is dying of thirst, then it would have a much higher value-in-exchange–conceivably even greater than diamonds.

Why is the price of diamonds so much greater than the price of water does marginal analysis help provide the answer?

The price of water is relatively low because the marginal utility is relatively low. The price of diamonds is relatively high because the marginal utility is relatively high. In general, people are willing to pay a relatively higher demand price for a good that generates relatively more satisfaction.

Why is water so cheap while diamonds are so expensive?

At low levels of consumption, water has a much higher marginal utility than diamonds and thus is more valuable. People usually consume water at much higher levels than they do diamonds and thus the marginal utility and price of water are lower than that of diamonds.

Why diamond is expensive?

The rarity, difficulties in mining, durability, cut, clarity, color, and carat of diamonds make them expensive and in demand. … Only 30% of the mined diamond stones match the standard gem quality that is required. It is this rarity of stone that makes them the world’s most expensive diamond.

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Which is more valuable diamond or water?

Smith noted that, even though life cannot exist without water and can easily exist without diamonds, diamonds are, pound for pound, vastly more valuable than water.

Who invented the diamond-water paradox?

This question is the diamond-water paradox, also known as paradox of value, and it was first presented by the economist Adam Smith in the 1700s. In his works, Smith points out that practical things that we use every day often have little or no value in exchange.

What is diamond water?

Diamond Water is a luxury high-pH Alkaline Water. This revitalizing water will hydrate you and will inspire your mind, body and soul. Order yours now, enjoy the taste, and relish in the way it makes you feel.

What is the economic value of diamonds?

The impact diamond revenues have on world economies includes: The diamond trade contributes approximately $7.6 billion per year to Africa. The two countries Russia and Botswana together produce 43% of the total volume, and 53% of the total value, of rough diamonds in the world.

How is the diamond water paradox resolved?

Smith “resolved” the paradox in through the Labour Theory of Value, essentially saying the real price of everything – what “everything really costs to the man who wants to acquire it, is the trouble of acquiring it.” He denied that there’s a necessary relationship between price & utility and connected it more towards …

What is the diamond water paradox quizlet?

State and solve the diamond-water paradox. The paradox is that water, which is essential to life, is cheap, and diamonds, which are not essential to life, are expensive. The solution to the paradox depends on knowing the difference between total and marginal utility and the law of diminishing marginal utility.

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Which of the following explain why the price of water per gallon is lower?

Water is in great supply relative to demand and thus has a very low price per gallon. Diamonds are in small supply relative to their demand, thus their price is very high per carat.

Is the marginal benefit of a glass of water?

The correct answer is small. The marginal benefit obtained from consuming an additional unit of a glass of water is small.

What is the meaning of marginal benefit?

A marginal benefit is a maximum amount a consumer is willing to pay for an additional good or service. It is also the additional satisfaction or utility that a consumer receives when the additional good or service is purchased.