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The 'representative agent' was an Alfred Marshall construct first referred to in his 'Principles of Economics' while outlining conditions of supply. Marshall's usage of representative firm as an abstraction was an attempt to overcome variations in firm sizes and industry supply. Despite its constricted meaning and applicability, the notion of representative firm drew sharp criticism and was labeled as a vague concept that belied heterogeneous realities. However, a broader notion of the representative agent has now been reinstated as one of the most widely used assumptions in economic studies.

An analysis of Chapter 5 of Carl Menger's 'Principles of Economics' reveals the originality in his approach to market economics. Among the topics addressed are his methodologies, notions of equilibrium, the formation of product prices in a decentralized economy, competition among buyers for a single unit of a monopolizing good, active monopoly pricing and full competition with special reference to seller's competition. Menger's analysis of price formation is unique as he ignores the Walarasian assumption of interdependence of markets and analyzes price in a single market.