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 income decreases or costs rise, customers will supplant increasingly costly things with less overpriced options. 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 is the adjustment in the interest for an item or administration produced by an adjustment in customers' extra cash, which is the bit of someone's pay that is available for spending on superfluous items or sparing. The term may is the same to the impact on unaffected salary when there is an adjustment in the cost that influences the measure of discretionary cashflow.
3. A new factory in a village provides livelihoods for the villagers.
positive externality
A positive externality is an advantage that is pleased in by an outsider because of a financial exchange. Outsiders incorporate any asset that is in a roundabout way influenced. 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. Externalities are additionally alluded to as overflow impacts, and a negative externality is likewise referred to as an outside expense.
