paradox of value


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paradox of value

the proposition that the value (PRICE) of a good is determined by its relative scarcity rather than by its usefulness. Water is extremely useful and its TOTAL UTILITY is high but, because it is generally so abundant, its MARGINAL UTILITY (and, hence, price) is low. Diamonds, by contrast, are much less useful than water but their great scarcity makes their marginal utility (and, hence, price) high.
References in periodicals archive ?
Patient balances typically comprise 20 percent of the total bill, yet can be five times as difficult to manage and collect, creating a paradox of value for the billing office.