Behavioral Economics is an interdisciplinary approach that challenges the traditional economic assumption of individuals as fully rational decision-makers by incorporating insights from psychology and cognitive sciences. This perspective argues that individuals rely on heuristic shortcuts in their decision-making processes, which in turn give rise to systematic cognitive biases. One of the most central concepts in the behavioral economics literature is the framing effect, which demonstrates that individuals may exhibit different preferences when objectively equivalent options are presented in terms of gains or losses. Grounded in Kahneman and Tversky’s Prospect Theory, this effect is primarily explained through the mechanisms of reference dependence and loss aversion. This study examines the framing effect within the theoretical framework of behavioral economics, discussing its psychological foundations, typological distinctions, and the critiques it poses to the invariance principle of classical rational choice theory. In addition, the study evaluates the application areas of framing effects in public policy, marketing strategies, and nudge-based interventions. Overall, the study aims to demonstrate that the framing effect constitutes a powerful analytical tool for explaining economic decision-making processes on a more realistic psychological basis.