Micro Meets Macro Via Aggregation

This paper studies the fundamentals of the aggregation problem. The concept is most central in understanding the relations between micro and macroeconomics. Though aggregation is mentioned often it is not studied explicitly in this generality - only some special cases are governed so far. The study shows how the macro relations arise from the micro relations via aggregation. In addition, we try to give areader an idea of under what kind of conditions the representative agent approximation is appropriate.