How distribution of income and size of a population are factors affecting market demand? Explain briefly.

Dear Student,

 

Market demand is the sum total of all the individual demands for any good or service at a given price.

(a) Size of population: Greater the population, higher the number of people demanding a product at a given price. So the market demand is higher with a greater population. Conversely, a low population implies less number of people to demand the product, and hence, less market demand.

(b) Distribution of income: If the distribution of income is in favour of the rich, then luxuries will be in demand. If the distribution of income is in favour of the poor, then necessities will be in demand.