Economics professors like to ask their students about the diamond-water paradox: Why is it that a good that is as essential to human existence as water costs so much less than a good like a diamond that is far less useful? Show that if we use consumer surplus, rather than price, as our measure of how ''valuable'' a good is to human existence, then no paradox existswater is valued much more highly than diamonds.

Principles of Economics, Version 9.1, Flatworld Knowledge

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The diamondwater paradox highlights the apparent contradiction between the value of water which is e... View the full answer