paradox of value. Observation that articles or goods critical to life (such as water) are very cheap, whereas others which have no bearing on human existence (such as diamonds) are very expensive. This paradox is explained by the law of supply and demand.Click to see full answer. In this regard, what does paradox of value mean?The paradox of value (also known as the diamond–water paradox) is the contradiction that, although water is on the whole more useful, in terms of survival, than diamonds, diamonds command a higher price in the market. who gave diamond paradox? economist Adam Smith Also, what is the paradox of value quizlet? ” The things that are most expensive in life, are the least necessary for us to live. (The things that are critical for our survival are crazy in comparison money wise. The real issue in life is scarcity.Why is the price of water so low relative to the price of diamonds? Enter Demand Price The price of water is relatively low because the marginal utility is relatively low. The price of diamonds is relatively high because the marginal utility is relatively high. In general, people are willing to pay a relatively higher demand price for a good that generates relatively more satisfaction.