In 2002, a psychologist won the Nobel Peace Prize for economics by studying how human nature influences our economic decisions. This, in turn, created a new, dynamic field called Behavioral Economics which is crucial to many aspects of the business and political worlds today (such as user experience design, or UX).

Classical economic theory is broken down by personal decision making. This aspect is where the foundations of economics have a grey area, so to speak. Classical economics assumes consumers have information when making a decision, by understanding prices and quality, which is rarely the case.

This infographic provided by The Globe and Mail outlines the vast components of this field.

Often, anchoring occurs where a person relies on the first piece of information they are given to make a purchasing decision. We even reject new evidence found that contradicts a pre-existing notion we had, called the Semmelweis Reflex.

Prices change perception. You can affect an experience by manipulating non-intrinsic attributes of goods. This means that there is a possibility to raise price, raise demand.

Cold calculations don't explain bubbles, where investors won't act on logic. This seeks to understand why people behave differently than when people would expect.

If people or companies rationally follow their own self-interest, the best outcome is unlikely if they can't, or don't, cooperate. This can be explained by Game Theory, and one of the best examples is through The Prisoners Dilemma. It explains that human ideas aren't shaped by game, that they are shaped by complex concepts ranging from justice to revenge.

The framing effect, or cognitive bias, occurs when a decision is manipulated based on how the options are presented. Past behavior is more reliable than future intentions, and people are willing to pay more for a product they are familiar with by endowment.

Psychological pricing can make the consumer feel as though they are getting a good deal. Interestingly enough, high-end retailers sometimes do the opposite, to embody that their goods are of a higher quality (and in some cases, mock discounts by Phantom Pricing to intentionally deceive customers). The Nudge Theory encourages people to act a certain way without changing their choices, so public policy is changed when a politician suggests a SPLOST as "better infrastructure" versus "higher taxes."

In regards to attitude towards risk, the majority of people prefer loss aversion. Loss is more painful than gains are pleasurable. Understanding this helps businesses make better decisions and nurtures our environment to be tailored for human experience.