Business
What is an economic bubble?
An economic bubble is when the price of an asset rises far above its real value, driven by hype and speculation, then suddenly crashes. People buy expecting prices to keep climbing — until confidence breaks and the bubble bursts.
See it, don’t just read it.
Watch a 2-minute lesson with voice + animation that explains an economic bubble.
Key things to understand
- 1Prices climb far beyond what fundamentals justify.
- 2Buyers pile in hoping to sell higher, fueling the rise.
- 3It's driven by speculation, hype, and fear of missing out.
- 4Eventually confidence cracks and prices collapse.
- 5Examples: the dot-com bubble and the 2008 housing bubble.
Frequently asked questions
- What causes an economic bubble?
- Speculation and herd behavior: people buy because prices are rising, pushing them higher still, detached from the asset's real worth.
- Why do bubbles burst?
- At some point buyers run out or doubt sets in; selling begins, prices fall, and panic accelerates the collapse.
- What is a famous example of a bubble?
- The late-1990s dot-com bubble and the mid-2000s housing bubble, both of which inflated wildly then crashed.