psychological economics

Psychological economics examines how psychological factors influence economic decision-making. It explores how people's emotions, biases, and social dynamics affect their choices regarding spending, saving, and investing. For example, individuals may make irrational financial decisions due to fear or optimism, rather than purely logical reasoning. By understanding these behaviors, economists and policymakers can better predict market trends and design strategies that align with how people actually think and behave, rather than how traditional economic models assume they should.