The diamond-water paradox
A)is the fact that people get more utility from water than diamonds, but the price of diamonds is much higher than that of water.
B)occurs whenever someone is willing to pay more for something that is a necessity compared to what he or she is willing to pay for a luxury.
C)illustrates the ability economists have to measure utility.
D)occurs when an individual prefers water to diamonds.
E)occurs when an individual prefers diamonds to water.

Question

Quizplus · Accepted Answer

The diamond-water paradox refers to the paradoxical situation where water, a necessity, has a much lower market price compared to diamonds, a luxury, despite its higher utility. This paradox became an important concept in economics as it contradicted the classical theory of value.

The Diamond-Water Paradox