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. For "The rising price of gold causes people to buy silver jewelry instead": The substitution effect occurs when a price change leads consumers to substitute one good for another (gold and silver jewelry are substitutes, so price rise of gold leads to buying silver instead).
2. For "When the price of gas increases, people drive less": The income effect here - as gas price rises, real income (purchasing power) for gas - related spending falls, so people drive less (change in quantity demanded due to income - like impact of price change).
3. For "A new factory in a village provides livelihoods for the villagers": A positive externality is a benefit to third - parties (villagers get jobs, a positive impact they didn't directly pay for).
4. For "A new factory in a village causes noise pollution": A negative externality is a cost imposed on third - parties (villagers experience noise pollution, a negative impact they didn't directly cause or pay for).

Answer:

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