Question

Why is the assumption of one representative good limited?

विकल्प

• It removes all price levels from the economy.

• It hides important differences across goods and sectors.

• It makes households independent of business.

• It treats government as the only key actor.

Answer 1

A single representative good is useful for simplification, but it hides important differences. Goods and sectors do not have identical production conditions, prices, or labour types.