Why Are Diamonds More Expensive Than Water?

Why ar Diamonds More Expensive than WaterAn article by a certain B . Venkatesh entitled The diamond- peeing strategy paradox ( HYPERLINK hypertext transfer protocol /network .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- water system supply paradox , which posits the classic question of why diamonds are to a greater extent costly than water considering that the latter is more than(prenominal) serviceable than the former , actually , is a classic bother comm besides posed to students of scotchs . The issue is somewhat tricky yet vital enough to warrant a serious watchword among the students of stintingsThe article is a good preliminary material for dis cussing the TCO1 which discusses the anterior 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 effectualness and scarcity issue was posited through a mantic situation . Suppose a person is in the redneck of a desert , and dying of thirst , what would this person mete out if he is offered diamonds or a bottle of water . Of of raceway in this situation , fill his thirst would be faraway more important for the thirsty person than the most big-ticket(prenominal) piece of diamond in the world And in this grouchy situation , water would be more useful than the diamonds , which in economics refers to the utility of water being higher than that of diamondsAnd conjure , the article further contended , the same person after meet his thirst was again offered bottles of water , it is only natural that this season , the! person s demand for water will decrease . In economic theory , this would mean the marginal utility for water being diminished .

And this time , the diamonds will suddenly get their importance being more urgent , and is suddenly more valuable that water .The marginalist theory of value in this casing clarifies this phenomenon by formulateing that the usefulness of water as a on the whole affects price , and not the usefulness of one social unit of water (as a whole or marginal utility . In other words , because water is in gigantic turn in , the marginal utility is low and indeed the price is proportional ly low . Conversely , because diamonds are useful but scarcer distributively small unit of diamond is more useful than enounce , a bottle of drinkig water . The bother 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 excessively other breed : namely , the intervention or non-intervention of governments depending on what particular economic system is in forceIn a market or capitalist economy , resources...If you want to get a full essay, ensnare it on our website: BestEssayCheap.com

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