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Adam Smith, the father of

modern economics, was puzzled why so many things that are useful and necessary for life are cheap while so many things we can live without are so expensive. This has come to be known as

(2pts)

the fallacy of interpersonal utility comparisons

Smith's conundrum

the "diamond-water" paradox

behavioral economics

the law of diminishing marginal utility

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  1. Today, 00:05
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    The "diamond-water" paradox.

    Explanation:

    Adam Smith in his book The wealth of nations posted a question consisting the comparison between the price of diamond and water.

    His idea was that why the price of diamond is so high as it has no importance in human life, and why the price of water is so low when it is highly significant for human life. One cannot die, if he doesn't have a diamond under his pillow although he will die if water is not given to him for days.
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