Tuesday, May 21, 2019

Diamond Water Paradox Essay

Marginalism was very important in the historical development of economics. Up through the 1870s, the marginal idea had not been grasped, which led to paradoxes such as the baseball diamond- water paradox. This paradox was resolved by the introduction of marginal thinking.A modern equivalent of the diamond-water paradox Why do basketball players wee-wee paid so much more than teachers, when teachers are so much more important? Because we acquire plenty of people who are capable of doing what a teacher has to do (at least at the simple/middle/high school level), whereas we have very few people who can do what a pro basketball player does.Not all decisions are marginal, however. Some decisions really are all-or-nothing deciding whether to shut down your business or stay open deciding whether to offer a newfangled product line deciding whether to get married deciding whether to move to New York. For decisions like these, you unavoidableness to compare the total expected benefit to the total expected cost.2As in the diamond water paradox, water is less expensive than diamonds because they are readily available and an additional unit of water adds little value to the individual. On the other hand, diamonds are scarce and every additional unit adds important value and this is the reason it costs more than water. The same is the reason for the disparity in salaries between teachers and athletes. go teachers are available in abundance like water, athletes are rare and so they are considered to be a precious commodity like diamonds and this scarcity is the reason they are paid such extensive amounts of money each year.

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