What Is 'The Paradox Of Value', According To Economics?

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Robin Burden Profile
Robin Burden answered
The paradox of value is an economic concept that looks at why vital items like water are so cheap, whilst frivolous commodities like diamonds are very expensive.

The paradox value of diamonds and water
Although water is vital to human survival, it costs a lot less to procure than does a diamond.

Philosophers like Adam Smith argued that this has less to do with the labor involved in mining a diamond - and more to do with the paradox between the 'marginal utility' of the two items.

According to the paradox of value, because water is in such great supply, its individual unit value is only based on the least-urgent use it can possibly have.

For example - a man with four gallons of water might save the first gallon to drink, the second to water his crops, the third to wash with, and the fourth to have a water fight in the local village.

According to the paradox of value, the water's marginal utility can be measured by its least-urgent use. In the example above, that would be 'to have a water fight'.

If water was in short supply, and the man only had three gallons of water - then its price would be higher, because its least-urgent utility would be higher up the scale.

If you apply the same theory to a man with five diamonds, it becomes obvious that a man's fifth diamond would be of more use than a fifth gallon of water. However, a man's last gallon of water would be worth his life - thus more than a man's last diamond.

Comparing water to diamonds in this manner is one way of explaining why in-demand commodities can often cost more than abundant necessities.
Eben Dumfeh Profile
Eben Dumfeh answered
The paradox of value states that a commodity, though not necessary for human survival, commands a greater value or price than a commodity humans can do without.

This explains why diamonds, which humans can live without, are far more expensive than water which humans can't live without.

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