SEU Microeconomics the Wealth of Nations the Diamond Water Paradox Discussion

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Economics

Saudi electronic university

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Discussion- 1: The diamond-water paradox

In “An Inquiry into the Nature and Causes of the Wealth of Nations” published in 1776, Adam Smith wrote:

“Nothing is more useful than water: but it will purchase scarcely anything… A diamond, on the contrary, has scarcely any use-value; but a very great quantity of other goods may frequently be had in exchange for it”

  • Use your own words and be sure to support your statements with logic and arguments.

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Explanation & Answer

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THE WEALTH OF NATIONS

The Wealth of Nations
Student Name
Institutional Affiliation

1

THE WEALTH OF NATIONS

2

Adam Smith, a Scottish economist philosopher in 1776 brought a broad understanding of
the building blocks of nations’ wealth theory where other economists of his era failed to explain
the and preference of different commodities. He applied the paradox of the diamond-water. The
essay will discuss how his ideology on the people’s preference for basic commodities like water
and non-essential commodities like gold. Accordingly, the essay will compare the high value of a
diamond and the low value of water. This will be discussed in the essay below.
Labor Value and Preference
Basing on human life, the production process of bringing a commodity to the market
dictates its value. The high cost of bringing diamond to the market makes its value to be high
c...


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