Mental Accounting

Definition: Mental Accounting is a consumer marketing term that questions the microeconomic principle of fungibility of money.
As per general microeconomic theory, money does not have labels attached to it, therefore money may be used seamlessly across all the purchases.
However in reality, people in their minds allocate money into separate accounts such as “entertainment”, “food”, etc.
Also they tend to behave in a pattern to minimize loss: so called "loss aversion".

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