The aim of aggregation theory is to link the micro and macroeconomic notions of aggregate demand. One would like such a link to exist for any heterogeneous population, for a large set of all conceivable income assignments, and for a small number of statistics of the income distribution. This cannot be achieved. What can be achieved is critically discussed in section “Income Aggregation”. In section “Monotone Mean Demand”, another important topic of aggregation theory is considered: how does mean demand react to price changes? As an example, the ‘law of demand’ is discussed.
KeywordsAggregate demand Aggregation Behavioural heterogeneity Exact income aggregation Law of demand Monotonicity Revealed preferences Slutzky substitution effect
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