In the paradox of value between expensive diamonds and inexpensive water,we see that
A) the consumer surpluses are very high for both goods.
B) diamonds have a low consumer surplus while water has a high consumer surplus.
C) diamonds have a high consumer surplus while water has a low consumer surplus.
D) the consumer surpluses are very low for both goods.
E) the consumer surpluses for the two goods cannot be compared.

Question

Quizplus · Accepted Answer

The paradox of value, also known as the diamond-water paradox, illustrates how water, despite being essential for life, is inexpensive, while diamonds, which are non-essential, are highly priced. This discrepancy is explained through the concept of marginal utility. Water has a low price because it is abundant and its additional (marginal) utility is low, leading to a high consumer surplus. Diamonds, being rare, have a high price and low consumer surplus because the additional satisfaction (marginal utility) gained from acquiring an extra diamond is relatively high compared to its cost.

In the Paradox of Value Between Expensive Diamonds and Inexpensive