Critical Thinking 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" Explain the diamond-water paradox and find out in the literature how economists have later solved this paradox.

Critical Thinking 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" Explain the diamond-water paradox and find out in the literature how economists have later solved this paradox.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter4: Utility Maximization And Choice

Section: Chapter Questions

Problem 4.2P

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