Critical Thinking 1: The diamond-water paradox In “An Inquiry into the Nature and Causes of the Wealth of Nations” published in 1776, Adam Smith wrote: “Nothing is more useful than water: but it will purchase scarcely anything… A diamond, on the contrary, has scarcely any use-value; but a very great quantity of other goods may frequently be had in exchange for it” Explain the diamond-water paradox and find out in the literature how economists have later solved this paradox.

Critical Thinking 1: The diamond-water paradox In “An Inquiry into the Nature and Causes of the Wealth of Nations” published in 1776, Adam Smith wrote: “Nothing is more useful than water: but it will purchase scarcely anything… A diamond, on the contrary, has scarcely any use-value; but a very great quantity of other goods may frequently be had in exchange for it” Explain the diamond-water paradox and find out in the literature how economists have later solved this paradox.

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter6: Elasticities

Section: Chapter Questions

Problem 20P

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