Scarcity is a central concept in economics. Scarcity means not having enough to fill subjective wants. 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.
Goods and services are scarce because of the limited availability of resources (the factors of production) along with the limits on our technology and our management skills. These determine the location of society's production possibilities frontier or curve (PPF). Inefficiencies in the use of resources (less than full employment or inappropriate employment of inputs) may limit the amount produced so the economy operates below its PPF. If it difficult to abolish them, these inefficiencies imply institutional (artificial) scarcity.
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 -- along with how societies often fail to attain this optimality and are instead inefficient.
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. (Other ways to make this decision involve tradition, community democracy, and government command.) In the market individuals and organization (such as corporations) 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 to develop mechanisms (such as pricing, incentives, or penalties) to achieve an optimal outcome (in terms of consumer welfare) between supply and demand.
Some socialists see this definition of scarcity as invalid, on the grounds that it assumes both human wants are unlimited. "Unlimited wants" seems a product of indoctrination (say, by advertisers) or a product of the unsatisfying nature of work in a capitalist economy. However, most economists disagree with this critique.
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. But these are examples of artificial scarcity, reflecting societal institutions.
As informational goods can be copied at negligible cost, they do not need to be scarce. This is why copies of free software such as GNU/Linux are typically available for very little money. However, proprietary software and many other products are kept artificially scarce by copyright and patent law.
"Substantivist" economists and economic anthropologists have argued that "scarcity" is a social construct and not a universal.
