In The Wealth of Nations, Adam Smith discussed what has come to be known as the diamond
Question:
In The Wealth of Nations, Adam Smith discussed what has come to be known as the "diamond and water paradox":
Nothing is more useful than water: but it will purchase scarce anything; scarce anything can be had in exchange for it. A diamond, on the contrary, has scarce any value in use; but a very great quantity of other goods may frequently be had in exchange for it.
Graph the market for diamonds and the market for water. Show how it is possible for the price of water to be much lower than the price of diamonds, even though the demand for water is much greater than the demand for diamonds?
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Step by Step Answer:
Begin by drawing two demand curves Label one Demand for diamonds and the ot...View the full answer
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