Prospect theory in behavioral economics predicts that as the price of flour increases, bakeries will try to avoid turning off their buyers by

Question

Quizplus · Accepted Answer

Prospect theory suggests that people are more sensitive to losses than gains. To avoid losing customers due to higher prices, bakeries might reduce the unit size of their products rather than increasing prices, as this is less noticeable to consumers.

Prospect Theory in Behavioral Economics Predicts That as the Price