Why Are Diamonds More Expensive Than Water?

Why ar Diamonds More Expensive than WaterAn article by a certain B . Venkatesh entitled The diamond- peeing arranging paradox ( HYPERLINK hypertext transfer protocol / vane .blonnet .com /iw /2003 /01 /05 /stories /41300 .htm http /www .blonnet .com ) is really an enkindle article on the nature of scarcity as a central theme in some(prenominal) give-and-take on stintings . The diamond- pee paradox , which posits the classic question of why diamonds are to a greater extent(prenominal) costly than water supply considering that the latter is more serviceable than the former , actually , is a classic paradox comm scarce posed to students of scotchs . The issue is somewhat tricky keep out vital enough to warrant a serious handling among the students of stintingsThe article is a good preliminary material for discussing th e TCO1 which discusses the opening economic problem of scarcity , including the comparison and contrast in ways capitalism and socialism deals with the three fundamental economic questions of what to produce , how to produce and for whom to produceThe article s central thesis on the advantage and scarcity issue was posited through a vatic situation . Suppose a person is in the center of a desert , and dying of thirst , what would this person hire if he is offered diamonds or a bottle of water . Of of fall in this situation , fill his thirst would be far-off more important for the thirsty person than the most valuable piece of diamond in the world And in this busy situation , water would be more efficacious than the diamonds , which in economics refers to the utility of water being higher than that of diamondsAnd extract , the article further contended , the same person after allay his thirst was again offered bottles of water , it is only natural that this geol ogical era , the person s demand for water w! ill decrease . In economic theory , this would mean the marginal utility for water being diminished .

And this time , the diamonds will suddenly take a shit their importance being more urgent , and is suddenly more expensive that water .The marginalist theory of value in this example clarifies this phenomenon by formulateing that the usefulness of water as a on the whole affects price , and not the usefulness of one building block of water (as a whole or marginal utility . In other words , because water is in with child(p) turn in , the marginal utility is low and thusly the price is proportionally low . Con versely , because diamonds are useful but scarcer distributively small unit of diamond is more useful than enounce , a bottle of drinkig water . The disturb equivalent to the bemused of one bottle of water , when he has a xii for instance , is less intense when he lost a one diamond when he has only one . In this context , the marginal utility of water is lower than that of diamonds . This explain why diamonds are more expensive than waterMarginal utility GraphBut the prices of commodities , be it diamonds or water , have to a fault other breed : namely , the intervention or non-intervention of governments depending on what particular economic system is in forceIn a market place or capitalist economy , resources...If you want to get a full essay, ensnare it on our website: BestEssayCheap.com

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