Representative good
Also called: Representative commodity, aggregation · Topic: Scarcity, Choice and Economic Systems · NCERT: Class 12, Ch 1 "Introduction (Macroeconomics)"
Meaning
A representative good is one imaginary commodity that macroeconomics uses to stand for all goods in the economy. It is used because the outputs, prices and employment of different goods tend to rise and fall together. Treating them as one good lets economists study total output and the general price level without tracking every product separately.
Example
Instead of studying rice, steel, cars and haircuts one by one, a macroeconomist speaks of "output" as a single good with one "price level". A statement such as "output grew and prices rose this year" uses this idea.
Don't confuse with
- Commodity in microeconomics: Microeconomics studies the price and quantity of a real, single good. The representative good is an imaginary stand-in for all goods taken together.
Related concepts
- Positive economic analysis
- Normative economic analysis
- Microeconomics
- Macroeconomics
- Ceteris paribus