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Economics (MindTap Course List)

13th Edition
Roger A. Arnold
ISBN: 9781337617383

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BuyFindarrow_forward

Economics (MindTap Course List)

13th Edition
Roger A. Arnold
ISBN: 9781337617383
Textbook Problem

State and solve the diamond–water paradox.

To determine

The diamond-water paradox.

Explanation

The diamond-water paradox is introduced by the great economist Adam Smith to explain the situation that the things with the highest value in use frequently have little or no value in real exchange, but the things with the highest value in real exchange frequently have little or no value in use. For example, water and diamond, water is a necessity good and diamond is not a necessity good in the day to day life. However, diamond has a higher price in the market than water. This is called water-diamond paradox. The reason is because water is commonly available and diamonds are rare. The need for water is stronger than for diamonds...

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