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08.07.2022 - 05:21

Suppose the price per gallon of water is 1 cent and the price per carat of a diamond is $10,000. Is the total utility of diamonds 10,000 times as great as the total utility received from water?

Question:

Suppose the price per gallon of water is 1 cent and the price per carat of a diamond is $10,000. Is the total utility of diamonds 10,000 times as great as the total utility received from water?

Answers (1)

Ethel April 2, 2023 в 15:15

No, the total utility of diamonds cannot be compared to the total utility received from water simply based on their respective prices. Utility is a measure of the satisfaction or usefulness a person derives from consuming a good or service, and it varies depending on individual preferences and needs. While diamonds have a high market value due to their scarcity and cultural significance, they may not necessarily provide more utility to an individual than access to clean water, which is essential for survival and well-being. Additionally, the marginal utility of consuming more of a good decreases over time, meaning that the satisfaction gained from additional units of water or diamonds will eventually diminish. Therefore, the total utility of diamonds and water cannot be accurately compared based solely on their prices per unit.

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