The reason that diamonds cost more than water is
A) the marginal utility of each diamond a consumer purchases is quite high due to the small amount of diamonds that most consumers purchase.
B) most consumers consume little water.
C) diamonds are more beautiful than water.
D) water is a necessity.

Question

Quizplus · Accepted Answer

The primary reason diamonds cost more than water, despite water being essential for life, is related to the concept of marginal utility. The marginal utility of each additional diamond is quite high because diamonds are rare and most consumers only purchase a small number of them. This high marginal utility, combined with their scarcity, drives up the price of diamonds. In contrast, water is much more abundant and its marginal utility decreases significantly as consumption increases, leading to a lower price despite its necessity for life.

The Reason That Diamonds Cost More Than Water Is