Analyzing the Value of Diamonds and Water: Economics Assignment

The assignment delves into the economic paradox of why diamonds are more valuable than water, despite water's essential role in survival. The student's response, drawing from economic principles, analyzes the concept of value, distinguishing between use and exchange value. It references Adam Smith's work, highlighting the influence of marginal utility and the role of supply and demand in determining a product's worth. The assignment explains how diamonds, due to their scarcity and desirability, command a higher price compared to the abundant availability of water, thus influencing the marginal utility. The work also references that the value of a commodity is not determined by the labor required to produce it nor the usefulness of it on its entirety. Finally, the assignment concludes by explaining how the marginal utility can change based on the situation.

Running head: SOCIOLOGY
Sociology
Name of the Student:
Name of University:
Author Note

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Why diamonds are worth more than water?
Diamonds are of greater worth as compared to water. There is a great paradox between
the two as water is far more essential to people than diamonds. Diamond is a luxury item which
people purchase while Water is one of the most essential components required for survival. It is a
paradox of value which exists and have been presented by Plato in Euthydemus and others in
their works.
Adam Smith is a philosopher who have presented the paradox and contrasted the concept
of value with respect to use and exchange. Value of an object is determined with respect to the
utility and power of purchase. This is also referred to as the value of exchange and value of use.
According to this, it can be understood that water is one of the most valuable component but do
not possess the power of purchase as little or nothing can be gained by exchanging it. However,
on the other hand, diamond has no value of use even though it possess great worth when used for
the purpose of exchange. Smith tried to assert the fact that there is no possible relationship
between utility and price. It is thus, very much related to production and labor and does not
concern the consumer much.
According to subjective theory of value and marginal utility, the price and value of a
commodity is not determined by labor required to produce it nor the usefulness of it on its
entirety. The value and worth of a product is determined on the basis of marginal utility. In other
words, the price and worth is determined on the basis of the importance and use to one person. A
product should be able to cater to someone’s need or want. Marginalists state that the worth of
diamond and water is determined on the basis of the usefulness of a unit of diamond and water.
The utility of water is higher as it is necessary to survive but the availability of the same in large

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amount decreases the marginal utility to quite low as compared to diamonds as the availability is
not in abundance.
The worth of diamonds are quite high as there are low supply as compared to the
demand. Whereas, water is tremendously useful and are found in abundance to meet the needs
and use of people. Therefore, people are ready to pay more to acquire diamond as compared to
water which makes diamond more worthy to people. However, it should also be noted that a
person dying of thirst in a desert will have more marginal use of water to diamonds as water is
more necessary at that point in time for survival.

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Bibliography
Youtube.com (2020). YouTube. [online] Youtube.com. Available at:
https://www.youtube.com/watch?v=5igp6CtiPEY&feature=youtu.be [Accessed 20 Jan. 2020].