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DIAMOND-WATER PARADOX: The perplexing observation that water, which is more useful than diamonds, has a lower price. If price is related to utility, how can this occur? This paradox was first proposed by classical economists in the 19th century and was subsequently used as a stepping stone for developing the notion of marginal utility and the role it plays in the demand price of a good. The paradox is magically cleared up with an understanding of marginal utility and total utility. People are willing to pay a higher price for goods with greater marginal utility. As such, water which is plentiful has enormous total utility, but a low price because of a low marginal utility. Diamonds, however, have less total utility because they are less plentiful, but a high price because of a high marginal utility.
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PERFECT COMPETITION, SHORT-RUN SUPPLY CURVE A perfectly competitive firm's supply curve is that portion of its marginal cost curve that lies above the minimum of the average variable cost curve. A perfectly competitive firm maximizes profit by producing the quantity of output that equates price and marginal cost. As such, the firm moves along its positively-sloped marginal cost curve in response to changing prices.
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YELLOW CHIPPEROON
[What's This?]
Today, you are likely to spend a great deal of time flipping through mail order catalogs trying to buy either a package of blank rewritable CDs or yellow cotton balls. Be on the lookout for empty parking spaces that appear to be near the entrance to a store.
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This isn't me! What am I?
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In 1914, Ford paid workers who were age 22 or older $5 per day -- double the average wage offered by other car factories.
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"We tend to forget that happiness doesn't come as a result of getting something we don't have, but rather of recognizing and appreciating what we do have." -- Fredrick Koeing
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IPUMS
Integrated Public Use Microdata Series
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