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Scarcity is a central concept in economics. Resources scarcity is defined as there being a difference between the desire and the demand for a good. What this means is that a good is scarce if people would consume more of it if it were free.

Where goods are scarce it is necessary for society to make choices as to how they are allocated and used. Economists study (among other things) how societies perform the optimal allocation of these resources.

For example, we may all want to own gold jewelery. However, the amount of gold available is limited, so it is necessary to make choices as to how it is allocated. In a market economy, this is achieved by trade. Individuals trade resources between themselves to reallocate resources to where they are most wanted. In a smoothly operating market system, the rate of exchange between different resources, or price will adjust so that demand is equal to supply. One of the roles of the economist is to discover the relationship between demand and supply and develop mechanisms (such as pricing, incentives, or penalties) to achieve an optimal outcome (in terms of consumer welfare) between supply and demand.

"Substantivist" economists and economic anthropologists have argued that "scarcity" is a social construct and not a universal.

Socialists deny that this definition of scarcity is not valid, on the grounds that it assumes both human wants are unlimited and attempts to argue the validity of market pricing of commodities on the basis that nothing will ever be in unlimited supply. However, this objection is not generally regarded as sustainable, since in almost all economic models, the variables which are considered are those which are scarce in the particular context.

Certain intangible goods are likely to remain scarce by definition or by design; examples include awards generated by honours systems, fame, and membership of elites. These things are said to have scarcity value; that is to say, all or most of their value is derived from their scarcity.

Further reading:

see also Thomas Malthus