This research paper explores the principles of behavioral economics, placing special emphasis on loss aversion, the endowment effect, and the role of nudge theory in everyday decision-making. By analyzing foundational theories, this paper highlights how psychological factors influence human behaviour, and aims to prove how behavioural economics provides a more realistic approach to decision-making than traditional theories. Behavioral economics has emerged as a field that explains the deviations in pre-existing consumer theories and provides a more realistic rationale to explain consumer behaviour in making decisions. Special attention is given to Richard H. Thaler, whose contributions to mental accounting, prospect theory, and nudge theory provided the foundation for understanding real-world behaviour. Methodologically, this paper adopts an analytical approach. It reviews pioneering literature, including Thaler's original papers related to behavioural studies, and contrasts them with neoclassical assumptions. This paper draws connections between theoretical concepts and real-world practical examples—from consumer spending patterns to market behaviour. Overall, this paper discusses that integrating human behavioural insights into economic thinking leads to a more realistic model of human behaviour.