- The Water And Diamond Paradox:
Today, i do Microeconomic's revision and in Chapter 19 i was study about the diamond-water paradox. At the mean time, i remembered that i've already learn from Critical Thinking. Which mean that some "essential" goods had much lower prices than some "unimportant" goods. Why would water, essential to life, be priced below diamonds, which have much less usefulness? This paradox is resolved when we acknowledge that water is in great supply relative to demand and thus has a very low price per gallon. Diamonds, in contrast, are rare and are costly to mine, cut, and polish. Because their supply is small relative to demand, their price is very high per carat. Water that are useful to people are more valuable and expect willing to pay more money for them but in reality water is less price. Thus, water has much more total utility (roughly, usefulness) than diamonds even though the price of diamonds greatly exceeds the price of water.
