Asked by Terry Valentine on Jul 15, 2024
Verified
The fact that people are willing to pay much more for a diamond, which is not needed for survival, than they are willing to pay for a cup of water, which is needed for survival, is an example of irrational behavior.
Irrational Behavior
Irrational behavior describes actions or decisions that are not in line with logical or rational thinking, often defying expected outcomes based on standard economic theories.
Diamond
A precious gemstone formed under high temperature and pressure conditions, often used in jewelry and industrial applications, not primarily an economic term unless discussing market dynamics.
- Analyze the rationality behind consumer choices and the concept of opportunity cost.
Verified Answer
SM
Sahil MeangiJul 19, 2024
Final Answer :
False
Explanation :
This phenomenon is explained by the concepts of marginal utility and scarcity. Diamonds are scarce and have a high marginal utility for some people, making them willing to pay more. Water, while essential for survival, is generally abundant and has a lower marginal utility, hence the lower price. This behavior is rational within the framework of economic theory.
Learning Objectives
- Analyze the rationality behind consumer choices and the concept of opportunity cost.