The price of diamonds is too high - Essay Example

Before the 19th century, diamond minerals were known to be rare as it was found in India and Brazil. During 1870 large mines for diamond deposits were discovered in South Africa at place near orange. Such became a threat to the few diamond producers despite the large supply thus made the commodity a luxury instead of a commodity. At the year 1888, a body was formed known as De Beers Consolidated mines in South Africa by suppliers in order to secure a high market for diamond prices. Initially, diamond cartel controlled successfully the supply worldwide regulation done at mine output and purchase of the exclusive right to mining nations across Africa.

At the onset of 20th century, DE beers dominated around 90 percent trade for diamond internationally. In 1930, there was a decline in the diamond demand, causing the son of De beers to initiate an advertising agency that incorporated an advertising strategy to target young men in order to purchase a ring for engagement in order to become a form of acceptance during courtship declaration. Through such strategy, diamond price rose, unlike other minerals. Currently, the cartel dominates in approximately two thirds of the diamond (Diamond, 1971).

According to pricing theory consideration, is on economic activity due to creation and transfer of value. That covers the trading of goods and services on economic agents that are distinctive. Such explains the high cost of the diamond in comparison with water .this depends on the utility of particular purpose and purchasing power of goods that the object possesses. Such is known as the value exchange and uses in value. Minerals such as diamond derive its value due to scarcity nature and labour intensity required to extract such minerals.

The labour involved forms a basic unit the exchange process of value of goods. That will be of great significance to determine overall prices. Thus, the nominal price according to Bagweel & Riordan (1991) has a