PARADOXES IN ECONOMIC THEORY

PARADOX OF VALUE

The paradoxical theory by the Scottish economist, the founder of classical economics Adam Smith (5 June 1723 – 17 July 1790) shows that, although water is on the whole more useful, in terms of survival, than diamonds, diamonds command a higher price in the market.

This idea has explained that, unlike from the aggregate supply of diamond the aggregate supply of water is higher.

For the A.Smith, the consumption efficiency of the product isn’t the main factor that creates the market value of that product. As a main factor it depends on aggregate supply level against current demand level.

Aghanemat Aghayev