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October 2012 Q30

E

e_sit

Member
Hi all,

For this question, I understand why the MU of diamond would be higher than water (due to scarcity) , but why is the MU curve for diamond lower than (or to the left of) the MU curve for water in the model answer from the past paper?

Thanks for the time!! :)
 
There's a good explanation of this on page 85 in the book.

Basically, water has a higher MU (at each output level) because it's a necessity, whereas diamonds aren't (though they are nice to look at)!
 
Understood, thanks for the reply!!

Whippet1 said:
There's a good explanation of this on page 85 in the book.

Basically, water has a higher MU (at each output level) because it's a necessity, whereas diamonds aren't (though they are nice to look at)!
Click to expand...
 
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