Bubble theory

Bubble theory, in general knowledge, refers to the idea that certain phenomena, such as economic markets or social trends, can experience rapid growth and inflated valuations, similar to a bubble that expands. When the underlying value cannot sustain this growth, the bubble eventually bursts, leading to a sharp decline or collapse. This concept helps explain events like stock market crashes or housing market downturns, emphasizing the importance of recognizing overvaluation and the risks associated with speculative behavior. Understanding bubble theory can aid in making informed decisions in various fields, including finance and behavioral economics.