The labour theory states that the price of an object is determined by the cost to bring it to market. Since it costs more to bring a diamond to market than water, the price of diamonds should be more than the price of water.
Why are people willing to pay more for a diamond than a bottle of water?
the marginal cost of producing an extra diamond far exceeds the marginal cost of producing an extra bottle of water.
Why are diamonds more expensive than water quizlet?
-The price of a good is equal to the marginal utility of the last unit consumed. … -Water is more valuable than diamonds in terms of total utility, but diamonds have a higher marginal utility, and thus a higher price.
Why diamonds are costlier than water can it be other way round in some situations explain using some economic principle?
In a typical situation, we aren’t willing to pay a lot of money for one more drink of water. Diamonds, however, are scarce. Because they are harder to find and attain, our marginal utility (additional satisfaction), for adding a diamond to our collection is much higher than someone offering us one more drink of water.
Why should diamonds be priced so high and water be priced so low?
Diamonds are high-priced because the demand is high relative to the limited quantity available. Water is inexpensive because it is typically fairly abundant, but if one is dying of thirst, then it would have a much higher value-in-exchange–conceivably even greater than diamonds.
When the government redistributes income from the wealthy to the poor?
In a Robin Hood effect, income is redistributed so that economic inequality is reduced. For example, a government that collects higher taxes from the rich and lower or no taxes from the poor, and then uses that tax revenue to provide services for the poor, creates a Robin Hood effect.
Which activity will most likely result in an external benefit?
In the context, a woman who does flower gardening on a vacant land which is next to her house can result an external benefit form the flowers. She can admire the beauty of the flowers and also the other people in the society. However it will not have an internal benefit to the woman.
What is the most important reason why diamonds are expensive quizlet?
Diamonds are high in price because they are relatively scarce and thus have high marginal utility. Water, however, is considered more useful than diamonds because it has much greater total utility. The facts that consumption takes time and time is a scarce resource can be included in the marginal-utility theory.
Who gave the concept of marginal utility?
The concept of marginal utility grew out of attempts by economists to explain the determination of price. The term “marginal utility”, credited to the Austrian economist Friedrich von Wieser by Alfred Marshall, was a translation of Wieser’s term “Grenznutzen” (border-use).
What is the diamond water paradox quizlet?
Diamond-Water Paradox. The observation that things with the greatest value in use sometimes have little value in exchange and things with little value in use sometimes have the greatest value in exchange. Utility. A measure of the satisfaction, happiness, or benefit that results form the consumption of a good.
Which is more valuable water or diamond?
At low levels of consumption, water has a much higher marginal utility than diamonds and thus is more valuable. People usually consume water at much higher levels than they do diamonds and thus the marginal utility and price of water are lower than that of diamonds.
Could a water bottle be more valuable than a diamond?
The first bottle of water is worth more to you than any amount of diamonds, but eventually, you have all the water you need. After a while, every additional bottle becomes a burden. That’s when you begin to choose diamonds over water.
Who Solved the diamond water paradox?
answer to the so-called “diamond-water paradox,” which economist Adam Smith pondered but was unable to solve. Smith noted that, even though life cannot exist without water and can easily exist without diamonds, diamonds are, pound for pound, vastly more valuable than water.
Does ASA still sell diamond water?
Asa Soltan Rahmati is a free spirit Persian who loves all things holistic. During the first few episodes of the first season of Shahs of Sunset, Asa talks about the Diamond water that she makes at home. … Years later you can still spot Diamond water being sold at your local Ross store.
Why is diamond so expensive?
A diamond is the hardest material on the earth and the most expensive gemstone as well. Diamonds are not rare but high-quality diamonds that can be used in the jewelry are rare. … In addition, the size and quality of the diamond also plays a major role on the price. These are the reasons why diamonds are so expensive.
What is important to solving the diamond water paradox?
According to Adam Smith, even though life cannot exist without water and can exist without diamonds, diamonds are more valuable than water. The marginal-utility theory of value resolves the paradox. Water in total is much more valuable than diamonds in total because the first few units of water are necessary for life.