The two primary methods used to answer the What? question are markets and government. Markets employ voluntary exchanges among buyers and sellers. Governments make use of laws, rules, and regulations that are involuntarily imposed on members of society.

Markets

Suppose, for example, that Chip Merthington, a newly enrolled college freshman at the Ambling Institute of Technology, is pondering the pursuit of a two equally appealing and spiritually fulfilling careers--public school teacher or certified public accountant. Chip is equally willing to spend the rest of his life in either occupation. However, because the accounting career is expected to generate twice the annual salary of the teaching alternative, Chip opts for accounting over teaching.

How does this illustrate resource allocation and the What? question. The higher price paid for accountants induces Chip to allocate his labor resources to the production of accounting services. But why is the price higher? Presumably it is higher because society derives greater satisfaction and is thus willing to pay more. The end result is that more resources (Chip) are allocated to accounting and fewer are allocated to teaching.

Government

Suppose, for example, that the Shady Valley city commission, duly elected by the citizens of Shady Valley, decides that people should consume larger quantities of frozen yogurt and smaller amounts of ice cream.

One way to achieve this end is to pass a law that every hot fudge sundae sold in Shady Valley must be prepared with frozen yogurt. Anyone violating this edict is subject to punishment by jail time and a sizeable fine. How does this address the What? question? In all likelihood, hot fudge sundae vendors seek to avoid punishment by preparing frozen yogurt based treats, resulting in more frozen yogurt production and less ice cream production.