McEachern's Contemporary Economics, demand is defined as a relation showing the quantities of a good that consumers are willing and able to buy at various prices per period (Page 100). On the other hand, supply is defined as a relation showing the quantities of a good producers are willing and able to sell at various prices during a given period (Page 130). The equilibrium price is reached when the quantity consumers are willing and able to buy matches the quantity producers are willing and able to sell (Page 162). Substitutes are products that can be used in place of each other (Page 118). While elasticity is another word for the responsiveness of a product (Page 108), a product that is insensitive to changes in price or income is considered inelastic (Page 109). Normal goods make up most goods and increase in demand as income increases (Page 117).
Diamonds are considered a normal good since demand increases when income increases. As China's middle class increases, the demand for diamonds continues to rise in soaring numbers, but the limited supply of these diamonds gets diminished quicker. Although they are a normal good, diamonds have a price elasticity of 0.5 and substitutes inferior to them, causing them to be inelastic. Olivia Goldhill claims producers are "scraping the bottom of their assets" because the supply of these precious stones are fading. Now-a-days, De Beers claims the success rate of finding a diamondiferous mine is 1 percent. By 2019, diamond production is predicted to fall by 1.9 percent each year. Diamond demand is overtaking supply. The decrease of supply will in turn increase the equilibrium price of diamonds within the market. The unavoidable result of the struggle for diamonds is an increase in price. Prices will rise for the conceivable future because populations continue to grow as does disposable incomes. .
My opinion regarding the issue of the shortage of diamond supply is that we need to rely on new methods of retrieving diamonds.