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Financial issues evoke feelings of stress, terror, and — sometimes — joy. Behavioral economics investigates the emotional aspects behind economic decisions. Businesses, governments, and individuals use this discipline to connect behavior to price, consumption, and demand, to learn what these statistics can teach about influencing present and future decision-making. Behavioral economics is an integral part of daily life, even beyond basic money matters.

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1. What is Behavioral Economics?

Behavioral economics is a research and psychology framework that juxtaposes traditional economics — where human behavior is about rationality and logical assumptions — with real behavior, where choices taken may be considered irrational and against best interests, possibly resulting in pricey trade-offs. The combination of economics and the facets of human behavior provides insights that inform the actions of many sectors, including politics, marketing, and health.

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