Question 1

"Do pearls have value because people dive for them, or do people dive for pearls because pearls have value?"

The question above arose upon discussing what determined the exchange value of a good. Compare and contrast the views of Classical, Marginalist and Neo-Classical School on value determination by referring to the phrase mentioned. (12 marks)

Question 2

Adam Smith from the Classical School had introduced the "water-diamond paradox" in his Theory of Value. But he did not solve the paradox because he failed to understand the concept of utility. Describe the paradox and explain how this paradox solved by William Stanley Jevons from the Marginalist School by using the law of diminishing marginal utility.(8 marks)