How did Cecilia’s knowledge of economics help her make a savvy commodity purchase? Cecilia has studied economics and knows about the value and investment potential of diamonds. The price of diamonds has recently decreased, and a new diamond mine has opened nearby. Cecilia decides to buy a diamond necklace while the prices are lower.
Answer
A
She knew that diamonds are a nonrenewable resource, making them scarce.
B
She knew that diamonds are popular and in high demand.
C
She knew that the purchase of diamonds will satisfy wants and needs.
D
She knew that the cost of diamonds depends only on the demand.
Explanation
Diamonds are nonrenewable, so their supply is limited and they can become scarce. The newly opened mine may temporarily increase the supply and lower prices, giving Cecilia a chance to buy while diamonds cost less. Choice C identifies the scarcity that supports diamonds’ value and investment potential; diamond prices do not depend only on demand, as choice D claims.
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