Value is subjective, and marginal utility is ordinal, not cardinal. However, I am a bit lost in trying to rebutt the Neoclassical Demand Curves. Any suggestion:
In addition to the marginal utility theory, the cost of diamonds versus water can also be understood by looking at the demand curve for water.For most consumers in the US, there is enough water so that its price falls low on the demand curve, in the inelastic range of -0.30 to -0.40. In other words, it is plentiful enough that if the price goes up by 10%, consumers would cut down usage by only about 3% to 4%. For larger price increases over longer periods of time, then the price becomes more elastic and consumers would take measures like not watering their lawns or installing low-flow shower heads to reduce their water usage by larger amounts. And in the case of extreme drought where there is just barely enough water for drinking, the price would become very inelastic and skyrocket. In that situation, a year's supply of water would likely cost more than a diamond!So by looking at the demand curve for water, we can see that there really is no diamond-water paradox and that if water were in really short supply, its price would rise to reflect its true survival value.
Rebutt what exactly? The mistake here is that it is bringing in prices. They have no place in this explanation as they are derived themselves from valuations.
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Curves are inherently problematic, because they necessarily assume that your can buy fractions of goods with fractions of currency, e.g., buying 2.74658 apples for $1.0936756.
Jon Irenicus:Rebutt what exactly? The mistake here is that it is bringing in prices. They have no place in this explanation as they are derived themselves from valuations.
Thanks for the nuance between price and valuation.
I agree. I conjecture he would counter by suggesting a jagged curve?
The neoclassical explanation could be accused of circularity, because prices are meant to be explained by marginal valuations, and yet this explication of the law uses them to make sense of marginal utility.
i dont think demand curves explain so much as example. arent they just fictions?
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