Question

drag the tiles to the boxes to form correct pairs. match the scenarios with the economic concepts they illustrate. positive externality substitution effect negative externality income effect the rising price of gold causes people to buy silver jewelry instead. when the price of gas increases, people drive less. a new factory in a village provides livelihoods for the villagers. a new factory in a village causes noise pollution.

Explanation:

1. When the price of gold rises and people buy silver jewelry instead, it's the substitution effect as consumers switch to a substitute good due to price - change.
2. When the price of gas increases and people drive less, it's the income effect. Higher gas prices reduce real income available for driving.
3. A new factory providing livelihoods for villagers is a positive externality as it has a beneficial impact on the third - party (villagers).
4. A new factory causing noise pollution is a negative externality as it has a harmful impact on the third - party (villagers).

Answer:

• The rising price of gold causes people to buy silver jewelry instead. -> substitution effect
• When the price of gas increases, people drive less. -> income effect
• A new factory in a village provides livelihoods for the villagers. -> positive externality
• A new factory in a village causes noise pollution. -> negative externality