“The price of diamonds is too high”
This essay discusses the statement “the price of diamonds is too high”; it will analyze the diamond cartel and its history in order to determine the validity of this statement. Various microeconomic theories will be discussed and explained, all of which are involved in the diamond cartel. The Oxford Dictionary defines a cartel as “an association of manufacturers or suppliers with the purpose of maintaining prices at a high level and restricting competition” [Oxford Dictionaries; unknown]. Therefore, the diamond cartel consists of a group of manufacturers/suppliers of diamonds who come together in order to restrict supply and as a result increase the price of diamonds. This essay will focus, mainly; on the De Beers diamond cartel and how this cartel has led people to believe that diamonds are scarce [“Have you ever tried to sell a diamond?” – Edward Jay Epstein; unknown]. The success of the cartel can be explained using microeconomic theories, such as how a decrease in the supply and an increase in the demand of a product increase its price.
The main point of the diamond cartel is to decrease the supply of diamonds (therefore; diamonds seem to be scarce) in order to increase their price. As is shown in the graph below, according to the law of supply, decreasing the supply of a product shifts the supply curve up and left (from supply curve 1 to 2), therefore, changing the equilibrium point (from E1 to E2) and increasing the price of the product (P1 to P2) [Michael Parkin et al.; 2010].
One of the goals of the cartel is to keep a monopoly position that is resilient [Ivona Vogelsang; 2005]. The Oxford Dictionary defines a monopoly as “the exclusive possession or control of the s...
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...er. Business Insider. [Online]. Available from: http://www.businessinsider.com/history-of-de-beers-2011-12?op=1. [Accessed: 15 April 2014].
• “Have you ever tried to sell a diamond?” – Edward Jay Epstein. (Unknown). Produced and directed by Ines & Ena Talakic. [YouTube video]. Available from: http://www.youtube.com/watch?v=7Yo6EVP-Trw.
• Oxford Dictionaries. (Unknown). Oxford University Press. [Online]. Available from: http://www.oxforddictionaries.com/definition/english/cartel. [Accessed: 14 April 2014].
• Parkin, M., Kohler, M., Lakay, L., Rhodes, B., Saayman, A., Schoer, V., Scholtz, F., Thompson, K. (2010). Global and Southern Perspectives: Economics. Cape Town: Pearson Education South Africa (pty) Ltd.
• Vogelsang, I. (2005). The International diamond Cartel. [Online]. Available from: http://are.berkeley.edu/~sberto/debers.pdf. [Accessed: 14 April 2014].
...sumption, creates emission of greenhouse gases and other harmful chemical materials. Once released into the air, it can cause environmental problems, which in turn threatens not only the environment, but also the health of the people who live in it. In order to reduce the use of energy to help protect our planet and our health, the diamond mining industry has implemented renewable energy programs to monitor energy and carbon emission. Since its beginning, mining company PHP Billiton program has saved an equivalent of one million liters of diesel fuel per year at their Ekati Diamond Mine in Canada’s Northwest Territories. The health of the environment and the health of humanity are as one. Whatever we do to our planet, we do to ourselves. Reducing energy consumption of diamond mining not only helps protect our planet, but also helps protect the health of our people.
Priscilla. “The World Economy and Africa.” JSpivey – Home – Wikispaces. 2010. 29 January 2010. .
Final contribution of de beers to the diamond pipeline is the promotion of diamond jewelry for the industry; through advertising campaigns developed from extensive market research; trade promotional activities and jewelry design competitions
Some of the highest producing diamond mines are countries in Africa. Countries that had some of the highest rate of conflict were Angola, The Democratic Republic of Congo, Sierra Leone, and Liberia. The ...
It’s hard to imagine that a mineral could be fueling wars and funding corrupt governments. This mineral can be smuggled undetected across countries in a coat pocket, then be sold for vast amounts of money. This mineral is used in power tools, parts of x-ray machines, and microchips but mostly jewelry. Once considered the ultimate symbol of love, the diamond has a darker story. "Blood" diamonds or "conflict" diamonds are those mined, polished, or traded in areas of the world where the rule of law does not exist. They often originate in war-torn countries like Liberia, Sierra Leone, Angola, and Côte d'Ivoire were rebels use these gems to fund genocide or other questionable objectives. Even with a system known as the Kimberly process which tracks diamonds to prevent trade of these illicit gems, infractions continue as the process is seriously flawed. The continuation of the blood diamond trade is inhuman, and unethical, and in order to cease this illicit trade further action to redefine a conflict diamond, as well as reform to the diamond certification prosess is nessasary.
Oligopolists are drawn in two different directions, either to compete with each other or to collude with each other. If they collude, they end up acting as monopoly and thereby maximising the industry's profits. However they are often tempted to compete with each other inorder to gain a bigger share of the profit of the industry.
Deep within African mines, elusive diamonds lay enveloped in the Earth’s crust. Possessing much influence, beauty, and tension, nature’s hardest known substance causes parallel occurrences of unity and destruction on opposite sides of the globe. Diamonds, derived from the Greek word "adamas", meaning invincible, are formed deep within the mantle, and are composed entirely from carbon. Moreover, only under tremendous amounts of heat and pressure can diamonds form into their preliminary crystal state. In fact, diamonds are formed approximately 150km- 200km below the surface and at radical temperatures ranging from 900-1300 C°. When these extremes meet, carbon atoms are forced together creating diamond crystals. Yet how do these gems, ranking a ten on Moh’s hardness scale, impact the individual lives of millions of people besides coaxing a squeal out of brides-to-be? These colorless, yellow, brown, green, blue, reddish, pink, grey and black minerals are gorgeous in their cut state, but how are these otherwise dull gems recognized and harvested? Furthermore, how and why is bloodshed and violence caused over diamonds in Africa, the supplier of approximately 65% of the world’s diamonds? (Bertoni) The environmental, social, and economic impact of harvesting, transporting, and processing diamonds is crucial because contrary to popular belief, much blood has been spilled over first-world “bling”.
Santarossa, B. (2004, January 13). Diamonds: Adding lustre to the Canadian economy. Retrieved November 06, 2017, from https://www.statcan.gc.ca/pub/11-621-m/11-621-m2004008-eng.htm
[5] Diamond Industry Annual Review, De Beers Signs New Angolan Agreement, [internet] Accessed on: 13th November 2005, http://www.pacweb.org/e/images/stories/documents/addendum%20angola%202005-english.pdf
The film marker is trying to raise awareness of the illicit conflict diamond trade and reinforcing the Kimberley process1 and showing how it will stem the flow of conflict diamonds. This is successful mainly due to the public outburst after the movie. The great impact of the movie has caused diamond companies like De Beers2 to start a pre-emptive PR (public relationship) campaign, even before the movie was released to inform people that their diamonds are conflict-free.
A monopoly is “a single firm in control of both industry output and price” (Review of Market Structure, n.d.). It has a high entry and exit barrier and a perceived heterogeneous product. The firm is the sole provider of the product, substitutes for the product are limited, and high barriers are used to dissuade competitors and leads to a single firm being able to ...
... rebel fighters and insurgencies. The practice is most often associated with conflicts in Africa. The argument surrounding blood diamonds was brought to light in the early 1990s with civil wars in Sierra Leone, Angola, the Republic of Congo, and Liberia. During this time, blood diamonds comprised about 5 percent of the world diamond market, according to the World Diamond Council’s DiamondFacts.org website.
...sive, unaffordable yet basic commodities, spurring economic growth and supporting the legal economy. This is a critical provision as it fosters the aspects of trade in the world. It is also important to agree that this transaction in almost every tradable commodity and services both genuine and counterfeit supports the dealings shown in black market trade. According to Bahmani-Oskooee & Goswami (2005), the supporters of black market cite many reasons for its embracement. The fact that the trade involves transaction in almost every tradable commodity and services both genuine and counterfeit makes it very difficult to curb. This is demonstrated explicitly by the supporters of black market who cite numerous reasons for its existence. The economic support, employment creation, money circulation, and many others have anchored this trade within various world economies.
The third determinant of the diamond – related and supporting industries looks at the industry suppliers and...
Layton, A. P., Robinson, T. J. C., & Tucker, I. B. (2012). Economics for today. South