Question

Diamonds have a higher monetary value than water because: a. diamonds are scarce. c. water has limited value. b. diamonds are a necessity. d. water has little utility.

Answer 1

paradox value is the apparent contradiction between the high monetary value of a nonessential item and the low value of an essential item. For example, diamonds have a higher monetary value than water because diamonds are scarce and appeals more to consumers' utility.

Answer 2

Though diamonds are mostly used for aesthetic purposes, its price is far higher than a gallon of water. This is because (A) diamonds are scarce compared to water.

The principle of scarcity states that objects that are rarer in the market would be valued at a higher price compared to things that can be found everywhere. Since water is more commonly found than diamonds, water is cheaper than diamonds.