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Saudi electronic university
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Running head: THE DIAMOND-WATER PARADOX 1
The Diamond-Water Paradox
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Running head: THE DIAMOND-WATER PARADOX 1
The Diamond-Water Paradox
Over the years, economists have been finding out ways of explaining the relationship
between price of various commodities and their use values. In economics, every good sold in the
market has its own use value proportional to its price value. The value of a good is determined
by the level of its utility value towards the buyers (Ajibade et al., 2018). Goods with high utility
value towards buyers tend to be of higher price compared to those of lesser usage. However, it is
so despicable to base this argument on unique goods such as the essential goods and rare goods.
In 1776, Adam Smith, an economist came up with a method explaining the discrepancy
between the value of a good based on its price and its level of usage towards the buyer ruling out
the labor input involved during its production; the Diamond-Water Paradox also known as the
Paradox of Value. This paradox based its argument on two unique and rare commodities; water
and diamond (Gryshova et al., 2019). Despite water being an essential commodity and necessary
for survival (use value), its price in the market is extremely lower and affordable to the
consumers. On the other hand, diamond being a rare commodity with a lesser use value, its price
in the market is extremely high and only few people can afford it (Baria & Sharma, 2018). This
is a conspiracy that focuses on the pricing of these two commodities based on how much people
value them.
Water is an essential commodity that people cannot live without. This makes it to be
readily available and abundant to everyone. Its easy accessibility and availability makes its price
value to be lesser in the market so that people can afford it (Grafton & Wyrwoll, 2020). On the
contrary, in the case of diamond, people can live without it: but the level of value that is
portrayed by people towards it makes its price to be high and extremely unaffordable. Despite
the high price of diamonds, people are still willing to pay the cost in order to have them. This
shows how much people do value diamonds and this explains its market price (Margques &
Pascoal, 2018).
Additionally, Smith further explained this paradox on the basis of the exchange value of
diamond and water. He argued that, despite water being an extremely essential commodity
towards people, its value cannot be exchanged with other commodities due its low price value in
the market; this means that water has a lesser exchange value (Dominique, 2017). In the case of

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Running head: THE DIAMOND-WATER PARADOX The Diamond-Water Paradox Institutional Affiliation Date Author Name 1 Running head: THE DIAMOND-WATER PARADOX The Diamond-Water Paradox Over the years, economists have been finding out ways of explaining the relationship between price of various commodities and their use values. In economics, every good sold in the market has its own use value proportional to its price value. The value of a good is determined by the level of its utility value towards the buyers (Ajibade et al., 2018). Goods with high utility value towards buyers tend to be of higher price compared to those of lesser usage. However, it is so despicable to base this argument on unique goods such as the essential goods and rare goods. In 1776, Adam Smith, an economist came up with a method explaining the discrepancy between the value of a good based on its price and its level of usage towards the buyer ruling out the labor input involved during its production; the Diamond-Water Paradox also known as the Paradox of Value. This paradox based its argument on two unique and rare commodities; water and diamond (Gryshova et al., 2019). Despite water being an essential commodity and necessary for survival (use value), its price in the market is extremely lower and affordable to the consumers. On the other hand, diamond being a rare commodity with a lesser use value, its price in the market is extremely high and only few people can afford it (Baria & Sharma, 2018). This is a ...
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