Question
Diamonds are priced higher than water because :
Answer: Option C
Answer: (c)
The water diamond paradox or puzzle was a mystery of Adam Smith who observed that the price of diamonds was much higher than that of water even though water seemed to offer far more utility than diamonds.
The resolution of this puzzle or paradox is based on the distinction between marginal utility and total utility. The marginal utility of diamonds is very high and so consumers are willing to pay higher prices for diamonds, than for water.
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Answer: (c)
The water diamond paradox or puzzle was a mystery of Adam Smith who observed that the price of diamonds was much higher than that of water even though water seemed to offer far more utility than diamonds.
The resolution of this puzzle or paradox is based on the distinction between marginal utility and total utility. The marginal utility of diamonds is very high and so consumers are willing to pay higher prices for diamonds, than for water.
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