Why Are Diamonds More Expensive Than Water?

Water is simultaneously one of the few things we absolutely cannot live without, and one of the things we value least. There's an economic rationale behind that.

Theideathathouseholdsandfirmsmustmakechoicesbecauseofscarcityisthefundamentalnotionofeconomicanalysis.Wenowwanttoexpandonthatanalysistoconsiderwhyconsumersbehavethewaytheydo.Whydoesapersondemandacertaingoodorservice?Anobviousansweristhatthegoodorserviceisexpectedtosatisfysomeneedordesireoftheconsumer.

Evaluate how the law of diminishing marginal utility can explain the diamond-water paradox.