Question

Write short note on Paradox of value

Answer 1

The paradox of value (also known as the diamond–water paradox) is the apparent contradiction that, although water is on the whole more useful, in terms of survival, than diamonds, diamonds command a higher price in the market. The philosopher Adam Smith is often considered to be the classic presenter of this paradox, although it had already appeared as early as Plato's Euthydemus.[1]Nicolaus Copernicus,[2] John Locke, John Law[3] and others had previously tried to explain the disparity.

Answer 2

The concept of paradox of value is the concept given by Adam Smith and is used for the subjective valuation and marginal utility.

• Smith points out that there is sometimes little or no interest in return for practical things we use every day. Such approaches are called objective value theories, as value is seen as the object's property
• The value paradox also known as the diamond water paradox is the contradiction that, while water is more useful than the diamonds in terms of survival, still diamonds command a higher market price.
• Subjective value may indicate that diamonds are more expensive than water because they are more subjectively valued by people. Water is much more important, however, people choose between an additional diamond versus an additional water unit