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Showing posts with the label Economics

Behavioral Economics

Behavioral economics is a field of study that combines psychology and economics to understand how people make decisions in the real world. Traditional economics assumes that people are rational actors who always make decisions in their own best interest. Behavioral economics recognizes that people are often influenced by a variety of factors, such as emotions, biases, and social norms. So people may make decisions that are not necessarily optimal from an economic standpoint. For example, people may be more likely to buy a product if it is on sale, even if the discount is small. This is because people are more sensitive to losses than gains, a phenomenon known as loss aversion. People may be more likely to trust a product that is endorsed by a celebrity, even if there is no evidence that the product is actually better than its competitors. This is because people are susceptible to social influence. Behavioral economics has a wide range of applications, from business to government p