representativeconsumer
A representative consumer is a simplifying assumption used in macroeconomic models in which the entire economy's household behavior is distilled into a single, optimally choosing agent. This agent's preferences and constraints aim to reflect the average consumption, labor, and savings decisions of the population. The representative consumer chooses sequences of consumption and leisure over time to maximize a lifetime utility subject to a budget constraint, given prices, technology, and uncertainty.
In dynamic models such as DSGE models, the representative consumer's first-order conditions determine aggregate demand, saving,
Limitations include abstraction from heterogeneity in income, wealth, and preferences, as well as distributional effects of
In summary, the representative consumer is a foundational but simplifying device in macro modeling, balancing tractability