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The importance of behavioural economics

Are people rational?

Traditional economic analysis assumes that economic agents act rationally when taking decisions, but is this always the case? Maria Kozlovskaya looks at how behavioural economics sets out to explore this question

rational decision-making, behavioural economics, loss aversion

A good understanding of consumer behaviour is the foundation of economics. If we know what people put in their supermarket trolley, we can predict the demand for each product. The importance of this knowledge cannot be overstated. Such life-changing phenomena as inflation, economic growth and unemployment are all outcomes of the supply-and-demand interaction.

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