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Overview of Behavioral Economics

Behavioural economics is the study of the effects that psychology has on the decision making of the economy. This tends to be the way that people think and feel when they are spending money on a certain good or service. The great economist Adam Smith was the first follower of this idea through his book “The theory of moral sentiments” which dates back to 1759. However, it took over 100 years to get a more clarified meaning of how big of a role the psychology of a buyer plays in economics. In behavioural economics there are seven basic principles which all contribute to the decision making process. Behavioural economics can explain how people will react to different situations such as times when there are no economic problems and times when there is an economic adversity either within the society or at home. In this context, the emotional decision should be taken more seriously when trying to consider different economic flows.
Consumer behaviour, which is a part of behavioural economics and of course an important part of buyer behaviour, is the study of the six w’s which are who, wh…

 

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