In economic theory and econometrics, the term heterogeneity refers to differences across the units being studied.
For example, a macroeconomic model in which consumers are assumed to differ from one another is said to have heterogeneous agents.
[1] Methods for obtaining valid statistical inferences in the presence of unobserved heterogeneity include the instrumental variables method; multilevel models, including fixed effects and random effects models; and the Heckman correction for selection bias.
For example, individual demand can be aggregated to market demand if and only if individual preferences are of the Gorman polar form (or equivalently satisfy linear and parallel Engel curves).
DSGE models with heterogeneneous agents are especially difficult to solve, and have only recently become a widespread topic of research; most early DSGE research instead focused on representative agent models.