Why are diamonds more expensive than water?
A) because the last glass of water has higher marginal utility than the last diamond
B) because the last diamond has higher marginal utility than the last glass of water
C) because you get more total utility from diamonds
D) because water is a necessity

Question

Quizplus · Accepted Answer

The reason diamonds are more expensive than water is that the last diamond has a higher marginal utility than the last glass of water. Marginal utility refers to the additional satisfaction or usefulness gained from consuming one more unit of a good or service. While water is a necessity for survival and has a higher total utility, the demand for diamonds is driven by their rarity, aesthetics, and cultural significance, which makes them valuable and expensive.

Why Are Diamonds More Expensive Than Water