how does the economy benefit from behavior discouragement
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What is Behavioral Economics
Behavioral Economics is the study of psychology as it relates to the economic decision-making processes of individuals and institutions. The two most important questions in this field are:
1. Are economists' assumptions of utility or profit maximization good approximations of real people's behavior?
2. Do individuals maximize subjective expected utility?
BREAKING DOWN Behavioral Economics
In an ideal world, people would always make optimal decisions that provide them with the greatest benefit and satisfaction. In economics, rational choice theory states that when humans are presented with various options under the conditions of scarcity, they would choose the option that maximizes their individual satisfaction. This theory assumes that people, given their preferences and constraints, are capable of making rational decisions by effectively weighing the costs and benefits of each option available to them. The final decision made will be the best choice for the individual. The rational person has self-control and is unmoved by emotions and external factors and, hence, knows what is best for himself. Alas behavioral economics explains that humans are not rational and are incapable of making good decisions.
Behavioral Economics is the study of psychology as it relates to the economic decision-making processes of individuals and institutions. The two most important questions in this field are:
1. Are economists' assumptions of utility or profit maximization good approximations of real people's behavior?
2. Do individuals maximize subjective expected utility?
BREAKING DOWN Behavioral Economics
In an ideal world, people would always make optimal decisions that provide them with the greatest benefit and satisfaction. In economics, rational choice theory states that when humans are presented with various options under the conditions of scarcity, they would choose the option that maximizes their individual satisfaction. This theory assumes that people, given their preferences and constraints, are capable of making rational decisions by effectively weighing the costs and benefits of each option available to them. The final decision made will be the best choice for the individual. The rational person has self-control and is unmoved by emotions and external factors and, hence, knows what is best for himself. Alas behavioral economics explains that humans are not rational and are incapable of making good decisions.
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