The Four C's: Carat
Diamonds are sold by the carat (ct), not to be confused with karat (kt), which refers to gold purity. Jewelers often refer to the carat weight of diamonds in terms of percentage points. This is particularly true of stones under one carat. There are 100 points to a carat, so if a diamond weighs 75 points, it is .75 of a carat.
Carat is a unit of weight, not area. Depending on the cut of a stone, specifically its depth, a diamond weighing .90ct could conceivably have a larger diameter than a 1.00ct stone and therefore appear bigger. The comparative size/weight illustration below gives an accurate comparison assuming all stones are equally well cut.
Note: This is the proportionate increase in size of properly cut diamonds, not the actual size.
Carat Impact on Price
The price per carat of diamonds increases significantly with size due to the rarity of larger gemstones, particularly at popular size thresholds. For example, there is little difference visually between a .95 carat diamond and a 1.00 carat diamond however the price difference between the two can be significant due to the 1.00 threshold.
Also, as a rule, price increases per carat between smaller and larger stones, due to the rarity of larger gemstones. The larger the stone (all else being equal in terms of overall quality), the more it will cost per carat, not just the more it will cost overall due to the number of carats it weighs. For example, a top-quality two-carat stone could easily cost three to four times as much as a one-carat stone, not twice as much as one might expect. Again, this is due to the increased rarity of larger sized diamonds.