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The diamond–water paradox explains why the demand for diamonds, which do not sustain life, is greater...

The diamond–water paradox explains why

the demand for diamonds, which do not sustain life, is greater than the demand for water, which is essential to life.

the total utility in society for diamonds, which do not sustain life, is greater than the total utility in society for water, which is essential to life.

diamonds and water are usually purchased in separate transactions.

water, which is essential to life, is expensive, whereas diamonds, which do not sustain life, are inexpensive.

water, which is essential to life, is inexpensive, whereas diamonds, which do not sustain life, are expensive.

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Answer #1

Diamond is expensive because people place more value in it. Water is not expensive because it is available in abundance so people place little value in it. Because of this reason the total utility for water is greater than the total utility of diamon for the society. But the marginal utility for diamond is greater than the marginal utility of water. Select: water, which is essential to life, is inexpensive, whereas diamonds, which do not sustain life, are expensive.

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