Influence of Behavioural Economics on our choices

The tendency to purchase items that aren't genuinely needed, simply because they're on sale, is a common example of being nudged by the invisible hand of behavioral economics. This field blends psychology with traditional economic theory to better understand why people make the choices they do and how producers influence them into buying a particular commodity over others.

Human needs aren't always driven by prudence or rational analysis. People often overlook opportunity costs and the practicality of a product or service simply because their eye catches a compelling offer like "Buy One, Get One Free" or "Bundle & Save." Nobel laureate Richard Thaler said, "Behavioural economics examines the differences between what people 'should' do and what they actually do and the consequences of those actions."

Behavioural economics refers to the study that combines insights from psychology and economics to understand how people make decisions, especially when they deviate from the traditional economic assumption of being fully rational, self-interested, and perfectly informed. In a world overflowing with choices, understanding the why behind our decisions is more important than ever.

It doesn't just explain consumer habits-it also helps businesses design better products, policymakers create more effective regulations, and individuals make smarter financial and lifestyle decisions. It challenges the traditional notion that consumers always act in their best interest, revealing instead how subtle cues like limited-time offers or the framing of choices can sway our decisions and cause us to overlook our needs.

As this field continues to evolve, its applications extend beyond marketing and commerce. Ultimately, understanding these insights empowers individuals and institutions alike to make more informed, intentional and beneficial choices in a world where every decision counts.

Alyna Gupta, Class XII, Carmel Convent School, Chandigarh