The water and diamond paradox can be explained with the law of diminishing marginal utility and the comparative availability of water and diamonds.

Question

Quizplus · Accepted Answer

The water and diamond paradox, which questions why diamonds are more valuable than water despite water being essential for life, can be explained by the law of diminishing marginal utility and the relative scarcity of diamonds compared to the abundant availability of water. The marginal utility of consuming an additional unit of water is low because water is plentiful, while the marginal utility of an additional diamond is high due to their rarity, making diamonds more valuable.

The Water and Diamond Paradox Can Be Explained with the Law