Siya says a thing's price is set by how useful it is — so water is the most useful and should be…

Why

Siya has one honest idea — usefulness does affect what people will pay — but she has made it the whole story, which leads to the strange conclusion that water should cost more than diamonds. Price also depends on how SCARCE something is and how much effort it takes to get. Water is essential, but in most places it is abundant and easy to supply, so each extra litre is cheap. Diamonds are not very useful, but they are rare and hard to mine and cut, so people compete to own the few that exist and the price climbs. Test it: the same bottle of water that costs a few rupees in your town would sell for a great deal in the middle of a desert, where it is suddenly scarce — its usefulness did not change, its scarcity did. Her friend is right: scarcity and the effort to obtain something matter alongside usefulness — that is why water is cheap and diamonds are dear.