Research Paper on Population Growth and Market Size: Impact on Consumer Market Potential

Introduction

Changes in both population size and population profile such as aging and diversity affect the market size and the consumer market potential in both positive and negative ways. Growth in population will increase the market size as well as the consumers' buying potential (Gamble & Downing, 1985). It is also important to note that shifts in the population profile do not only create new opportunities but also change demand in a market. The independent variable is population growth while the dependent variables are market size and consumer market potential.

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The rationale of studying the relationship between the population and market changes is that changes in both population profile and size affect the consumer market potential. Therefore, it is important for consumer goods and service businesses to monitor demographic trends in their markets. Demographic shifts like aging and diversity also create new opportunities and impact demand.

This research approached the subject of population and market changes from the functional sociological perspective. In sociology, functionalism is a school of thought that views society as a system consisting of several interconnected parts that function together to maintain a state of social equilibrium and balance in every area. The functional perspective supports the idea that the population and the market are connected parts of any system and they work together in that an increase or decrease in the former causes far-reaching changes in the latter.

Moreover, the paper uses some sociological concepts, including society, and the norm. Society, as used in the discussion, means a system of social interrelationships that links people in a given culture. The concept of society is relevant to the primary premise of this research because both population and market changes occur within the social system. Norm means standards or rules of behavior that govern social interaction. Norms are important because they determine aspects of the population such as birth rates, number of children, and aging, all of which affect market changes.

Methodology

The objective of the current study was to obtain information about the current status of the relationship between population and market changes. The focus of the research was to describe the connection between the independent variable i.e. population changes and independent variables which are market size and the buying potential of consumers. Therefore, the study took a descriptive design. This is qualitative research based on data and findings from previous studies. Data was collected through content analysis of previous studies conducted on the subject.

Findings and Discussion

Population Growth and Changes in Demand and Supply

Population growth means an increase in demand as well as supply in a market. Demand and supply forces cause a push-pull dynamic on the market prices. A shift in demand or supply will result in changes in market rates and prices (Peterson, 2017). When the demand for a good is high, their supply shrinks. As a result, market prices tend to go up. The high prices would then lead to an increase in supply (Mitchell, 2009). However, if the supply overtakes demand, prices would fall. Relatively stable supply is thus key to controlling prices according to demand.

Li (1996) conducted a study to analyze how population size is related to market demand in China. The study found that the size of the population has a greater impact on the consumption of products with smaller elasticity and a smaller impact on those that have greater elasticity. Li (1996) also noted that both the average salary and the salary structure are mediators of the impact of the population. The effect of salary structure on the market changes are far-reaching because income affects product prices, which in turn affect demand and supply, and demand and supply affect consumption. He further argued that the Chinese market is based on a socialist economic system, its control of inflation and price increases will promote improvement, social stability, and economic growth.

The findings of Li's study are reflective of the current situation in market-oriented economic systems where prices, demand, and supply are all subject to the effect of population size on the market demand. Demand and supply have had the same effects reflected in the current market demand. Through supply elasticity and prices, current population growth will impact the market demand of the future. Consumption changes occur slowly because population changes are also slow. Since the process of change occurs slowly, it allows the market to adjust production and distribution in order to stabilize supply.

For example, the supply of clothing is elastic in most markets. Therefore, clothing makers cannot grow their profits even if they increased their fixed assets, labor, and investment. However, services such as telecommunication, entertainment, and education have less elastic supply. Smaller supply elasticity in large consumer markets like China increases the costs of installation, which are heightened further by a state monopoly. Therefore, governments often use the elasticity of supply to regulate some necessities in their markets to march the optimum resource allocation.

Population Growth and Market Size

An increase in the number of people in a country leads to economic growth. With higher populations come greater production and consumption (Baker, Delong, & Krugman, 2005). However, certain conditions are necessary for this to happen. First, employment opportunities have to expand as fast as the labor market. Secondly, there should be access to the required training and education. Population growth brings more specialization. It also expands the market size, increasing returns to human knowledge and capital. Hence, it is possible to overcome diminishing human capital returns in a given generation.

Moreover, divergent societal norms on population growth in different parts of the world have significantly influenced birth rates, which will determine future market demand. Peterson (2017) confirmed this position from his research conducted to explore the role of the population in economic growth. The study analyzed the average annual population growth rates of different countries of the vis-a-vis their GDPs and Per Capita GDP from 1820 to 2010. The study noted that the world now has about 1 billion children, all of whom are under the age of 15 (Peterson, 2017). A great number of these children are in India and Africa. India, for example, has an estimated 200 million children in the primary school age (Peterson, 2017). The country's current demographics pose a great challenge in terms of education, but it is also a very exciting issue in terms of market development because all of these children will be adults soon. That means they will be looking for work, consuming things, and having aspirations about the future.

In that, sociologists predict a massive difference between the future of India and those of countries with negative population growth such as Germany and China. In Beijing and Berlin, for instance, it is rare to notice any children playing in the parks or walking in the streets. Fewer children are being born in these cities compared to India. One cannot walk down any street in India or Africa without falling over tens of very small children because they are much younger societies. The one-child policy is going to be a massive problem in China quite soon. Over the next 20 years, this is going to be a huge social, political, and economic challenge (Peterson, 2017). China will have a war for talent that will not be easy to fix. According to Agarwal (2019), even if the one-child policy was to be completely relaxed tomorrow, for example, it would be at least 20 years before we would see a difference in the number of graduates coming through university.

Furthermore, these demographic shifts will give India a significant competitive advantage over China and Germany in the next 30 to 35 years (Peterson, 2017). At the same time, China is currently experiencing monumental changes and its cities are not going to get smaller because of no babies. With 23 million new people being moved from rural areas into the largest cities in China every year, Chinese cities are going to explode instead (Peterson, 2017). The rural-urban migration is part of government policy being encouraged, and in the middle of all this are some of the greatest infrastructure challenges of the world. On top of that are similar urban movements in India. Some of the bigger cities of the world tend to stabilize at around 11 million and then they tend to seed more satellites (Peterson, 2017). These big 11 million cities have a huge maturing to do as they have infrastructure needs everywhere. Their population and demographic changes are exciting for people in all kinds of infrastructure work, and of course, also daunting for people in the business of pricing commodities.

Shifts in Demographic Profile and Market Changes

Lastly, demographic shifts such as aging change the relative importance of population groups. In an aging population, older people have greater relative importance because they form a larger group (Mitchell, 2009). Younger and older people have diverse financial needs as well as investment and saving preferences. They also make different choices on financial instruments and markets. A shift in such important economic factors affects the financial markets. People tend to balance their consumption with their incomes (European Central Bank, 2007). That means they save and purchase assets while working and sell their investments to raise money for consumption when they retire. Also, older people are less likely to take a risk because of their shorter lifespans.

Demographic data such as health trends are important in understanding the stability of the labor force and can help businesses to target nutrition-driven goods as well as medical services and products. According to Mitchell (2019), there are some important demographic megatrends that play a crucial role in shaping the global market. They include increased immigration and emigration, aging, changing fertility rates, and urbanization. Long term success requires that a business possesses the ability to project the patterns of change in a market and adapt to them. Moreover, by analyzing different aspects of population data, marketers can adapt their products in a way that better targets the market based on diversity, segmentation, and age. For example, a business that has succeeded in one country can easily proper in another market with similar demographic profiles.

Conclusion

The study reached the conclusion that changes in population size and profile impact nearly aspects of the market in the short-term or long run. In particular, the aspects of the market affected by the population are market size, demand, supply elasticity, prices, consumers' purchasing potential, which all increase with the rise in population. These effects are mediated by both the average salary and the salary structure of the population. Moreover, normal economy markets have various conditions to achieve the necessary balance between product prices, market demand, and supply. One of the conditions is that employment opportunities have to expand as fast as the labor market. This ensures that demand increases with production. The second condition is access to the required training and education. Training and education are necessary because population growth does not bring more specialization but also expands the market size, increasing returns to human knowledge and capital both in the current and future m...