Match the scenarios with the economic concepts they illustrate.

1. The rising price of gold causes people to buy silver jewelry instead.

substitution effect

The substitution effect refers to the economic understanding that as costs rise — or income decreases — customers will supplant increasingly costly things with less exorbitant options. Then again, as the abundance of people builds, the inverse will in general be valid, as lower-estimated or second rate items are shunned for increasingly costly, higher-quality merchandise and ventures, known as the income effect. Although valuable to a few organizations like markdown retailers, the substitution impact is commonly exceptionally negative inside an economy, as it limits buyer and maker decision.  

2. When the price of chicken increases, families reduce their chicken intake substantially.

income effect

The income effect alludes to the adjustment in the interest for an item or administration caused by an adjustment in customers' extra cash, which is the bit of someone's pay that is accessible for spending on superfluous items or sparing. The term may likewise allude to the impact on genuine salary when there is an adjustment in the cost of a decent or benefit – which additionally influences the measure of discretionary cashflow – the impact can be positive or negative.  

3. A new factory in a village provides livelihoods for the villagers.

positive externality

A positive externality is an advantage that is delighted in by an outsider because of a financial exchange. Outsiders incorporate any individual, association, property proprietor, or asset that is in a roundabout way influenced. While people who profit by constructive externalities without paying are viewed as free-riders, it might be in light of a legitimate concern for society to urge free-riders to expend products which create significant outside advantages.  

4. A new factory in a village causes noise pollution.

negative externality

A negative externality is a cost that is endured by an outsider because of a financial exchange. In an exchange, the maker and purchaser are the first and second gatherings, and outsiders incorporate any individual, association, property proprietor, or asset that is in a roundabout way influenced. Externalities are additionally alluded to as overflow impacts, and a negative externality is likewise alluded to as an outside expense.