Suppose that in the year 2050, one gallon of water is more expensive than a one-carat diamond. What could explain this?

Question

Quizplus · Accepted Answer

The explanation for water being more expensive than a diamond could be due to either water becoming much more scarce (A) or diamonds becoming much less scarce (B). Both scenarios would lead to a shift in their relative prices. The diamond-water paradox, which illustrates how water, despite being essential, is cheaper than diamonds, which are non-essential but scarce, can be affected by changes in scarcity.

Suppose That in the Year 2050, One Gallon of Water