The marginal utility approach resolves the "paradox of diamonds and water." There is no paradox: the scarcer good, diamonds, have the higher marginal utility, even though water gives the greater total utility. This opens the way to develop a theory of demand based on utility. But we aren't there yet.
Demand is a relation between money price and quantity purchased. So far, using our example, we have seen why a person might give up a large amount of water to get a diamond. That's not quite the same as giving up a large amount of money for a diamond. So one step we need to take is to translate from the barter of goods for goods to the exchange of goods for money. Let's check that out, next.
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Money Demand