Microeconomics Essay Example | Topics and Well Written Essays - 750 words - 2

Microeconomics - Essay Example The price of a one carrot diamond is $10,000, while the price of 100 gallons of tap water is $0.50 (Textbook, 2007). The diamond – water paradox proves that the utility of a resource does not necessarily affect its price. The economical explanation of the diamond – water paradox is based on the law of demand and supply. The application of this law implies the reason the prices of diamonds are so high is based on the short supply of diamonds across the world (Varian, 2003). The prices of purified water sold in 20 ounce bottle units follow to certain extend same logic as the diamond – tap water paradox. Bottle water’s price is much higher than the water that comes into people’s home through its pluming system. To put the price in perspective with 100 gallons of water a company could prepare 640 twenty once bottles of water which retails at $1 a piece implying the market value of purified bottle water is 1040 times than the value of tap water. The quality of the product, its positive health benefit, its good refreshing taste and the formula that provides drinkable water at its optimum state of quality it can be to be consumed by humans. The marginal utility of bottle water is very suspect in comparison to tap water. The water in bottles has a market value which makes it an item that can only be used to be drank by a person, on the other hand tap water can used consumed orally by humans as well as a variety of other uses such as fro c leaning, to run machinery as a cooling agent, and many other uses. Tap water is way cheaper and has more used than bottle water. Water is a valuable liquid that is generally available at very low prices for most of the world’s population. In the continent of Africa in general water is not readily available for many villages across the African nation. The utility and value of water for a community is tremendous. If water is in a state of scarcity in a region the social political system is destroyed and a chaotic