The following points highlight the two main features of the market demand. The features are: 1. Income Distribution 2. Population Distribution.
Feature # 1. Income Distribution:
Even if a country’s national or per capita income remains constant, a change in the pattern of income distribution may lead to a change in the pattern of demand. There is likely to be a shift of demand from one product to another. If income is equitably distributed in a society most people will be able to buy the bare necessities of life, such as food and clothing.
If, on the other hand, income is inequitably distributed (so that few are rich and most are poor) there will be maximum demand for and production of luxury goods like costly dresses, VCRs, cars, gold jewellery, etc. Since most people live below the poverty line there will be minimum demand for and production of necessities like bread, cheap clothing, bicycles, and radio sets etc.
Thus, two societies may have the same level of income. But, the pattern of demand will be different due to differences in the distribution of income. If income is redistributed from the rich to the poor through tax-subsidy measures there will be a change in the pattern of demand. The demand for necessities will increase and the demand for luxuries will fall.
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Let us consider another type of redistribution of income. Suppose, income taxes are raised and the additional revenue collected through it is utilised to pay extra pensions to retired government employees. There will thus be a change in pattern of income distribution from the young people to the elderly people.
As a result, the demand for goods consumed by the latter (such as false teeth, hearing aids, pacemakers etc.) is likely to rise while those goods consumed by the young people (such as recorded pop music, tennis rackets etc.) is likely to fall. The important point to note is that such changes may occur without any change in the overall level of income. There is only a change in the distribution of existing income.
Feature # 2. Population Distribution:
A change in the age distribution of the population is likely to change the pattern of demand. Suppose, there is a fall in the death rate of people above 55. There is likely to be the same type of change in the pattern of demand for goods and services, which occurs due to change in the distribution of national income in favour of the old people.
A change in the sex ratio of the population is also likely to change the pattern of demand. If the number of girl babies born per thousand increases, this is likely to have some effect on the pattern of demand in the long-run, but not in the short run.
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Finally, migration of people from rural to urban areas may also lead to a change in the pattern of demand. The demand for rice may fall and the demand for dress materials, entertainment and transport services may increase as a result of such migration.