Behavioral economics is the study of the effects psychology has on economic decision making. This tends to be how people think and feel when they spend money on a particular good or service. The great economist Adam Smith was the first follower of this idea through his book “The Theory of Moral Sentiments” which dates back to 1759. However it took more than 100 years to have a clearer meaning of how important the role of psychology is of life. a buyer plays economical. In behavioral economics there are seven fundamental principles that all contribute to the decision-making process. Behavioral economics can explain how people will react to different situations, such as times when there are no economic problems and times when economic adversity occurs within society or at home. In this context, the emotional decision should be taken more seriously when trying to consider different economic flows. Consumer behavior, which is part of behavioral economics and obviously an important part of buyer behavior, is the study of the six w's which are who, what, when, why, where and how. Incorporates features of psychology, marketing and economics. Consumer behavior seeks to understand the buyer's decision-making process and how demographics, influences from family and friends, and behavioral changes can change a buyer's decision on a particular good or service. First, heuristics apply to experience-based techniques used for problem solving, discovery and of course learning. Heuristic methods are used to speed up the procedure of finding an acceptable answer; one of the best known heuristics is “the rule of thumb”. This means that most people's decisions are based on how easy it is... middle of paper....../arstechnica.com/science/news/2010/10/envy-stimulates-the-economyand- is -why-you-bought-your-iphone.ars [Accessed 3 December 2011]• Plous, S., (1993). The psychology of judgment and decision making. • Poundstone, W., March 19, 2010, “The Hidden Psychology of Menu Design.” Wired.co.uk [Online] available from: http://www.wired.co.uk/magazine/archive/2010/04/start/the-hidden-psychology-of-menu-design [Accessed 2 December 2011] • Tversky, A., Kahneman, D. (1981). "Decision framing and the psychology of choice". Science 211 (4481): 453–458• Welch, N., February 2010, “A Marketing Guide to Behavioral Economics.” McKinsey Quarterly [Online] available from: http://www.mckinseyquarterly.com/A_marketers_guide_to_behavioral_economics_2536 [Accessed 3 December 2011]• Wilkinson, N (2010), Introduction to Behavioral Economics, Basingstoke: Palgrave-MacMillan