Aggregation: Theory

The aim of the 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 assign- ments, and for a small number of statistics of the income distribution. This cannot be achieved. What can be achieved is critically discussed in Section 2. In Section 3, another important topic of aggregation theory is consid- ered: how does mean demand react to price changes? As an example, the 'law of demand' is discussed.