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.
What is the answer to the diamond water paradox?
answer to the so-called “diamond-water paradox,” which economist Adam Smith pondered but was unable to solve. 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.
Why should diamonds be priced so high and water be priced so low even when water is essential to sustain life while diamonds are not?
Water has high value in use of course. But its market value is low as compared with diamonds because is available in plenty . In terms of its market supply ,water is scarce but not as scarce as diamond . Therefore,market price of water is much lower than of the Diamond .
Why is a gallon of water less expensive than an ounce of diamonds?
Since water is much more plentiful than diamonds, the supply curve for water intersects the marginal utility curve at MUw, which is close to zero. … Because of the relative marginal utilities of water and diamonds, you are willing to pay much more for one more carat of a diamond than for one more gallon of water.
Why is diamond 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.
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.
Is water more valuable than diamonds?
Clearly, water is more valuable as an essential resource as opposed to the luxury of owning a diamond. As demand increases as well, consumers must choose between one additional diamond versus one additional unit of water.
Why should diamonds be priced so high and water?
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 water inexpensive?
Water is relatively cheap in most of California because the water itself is basically free. Customers are really paying only for the cost of pumping and transporting the water, and the administration costs of water agencies. … Despite Californians using less water, the MWD’s revenue is up this year.
Why are diamonds more expensive than water when you can live without diamonds but Cannot live without water?
The greater the supply we have of something and the more we use it, the less we value it. … “Economists tell us that the law of diminishing marginal utility dictates that consumers place a greater value on diamonds than on life-giving water.
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.
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.
Are diamonds actually worthless?
Diamonds are intrinsically worthless: Former De Beers chairman (and billionaire) Nicky Oppenheimer once succinctly explained, “diamonds are intrinsically worthless.” Diamonds aren’t forever: They actually decay, faster than most rocks.
What is the rarest gem?
Painite : Not just the rarest gemstone, but also the rarest mineral on earth, Painite holds the Guinness World Record for it. After its discovery in the year 1951, there existed only 2 specimens of Painite for the next many decades.
Are diamonds rarer than gold?
But, in its elemental form, gold is significantly rarer than diamonds, Faul told Live Science. … Gold is more abundant than large diamonds, but diamonds as a class of material are not particularly rare.