Curves are better than Cups in Economics

When I was studying Economics at UCLA, the one fundamental lesson that my professors regularly talked about was the Supply and Demand curve. It basically explains that if the price of an item drops, the demand will increase. If the item becomes completely free, the curve will indicate the maximum number of buyers that will acquire it.

However, if you study behavioral psychology, gamification, and/or Human-Focused Design, you will find that there is another side to the story. As it turns out, Scarcity is another driving force of consumer behavior. In economic theory, scarcity is well understood, but only in the sense of objective limits matched against the consumer’s utility derived from a purchase.

This is different from the Scarcity we are discussing in this chapter, which is related to Perceived Scarcity instead of Objective Scarcity. Sometimes objective scarcity is present without a person ever feeling or knowing...