Copyright (c) B.Achutha 1992 - 2000 Malaysia

Distribution of Wealth

How much money can each and every consumer spare for purchasing products? The Distribution of Wealth model attempts to answer this question from a theorectical model point of view. The data to build this model needs to be generated from a survey for the consumer population. When we plot a graph of the number of people versus the amount of money they can spend we have the Distribution of Wealth model. This is a very simple, subtle and powerful technique to gauge market size based upon pricing, shifts in market size due to pricing changes and changes in money supply, elastic behaviour of products and wealth of a nation. It is simple as we only need to group the amount of money that can be spared and quantify the number of people within each group from a sample population size.

The above distribution of wealth, D!, was drawn from the table below from a fictious population sample size of 63 people. Basically, it indicates that 1 out of 63 people can afford a product price of between $5 ot $6. The second line indicates that 2 out of 63 people can afford the product priced at $4 to $5. In actual fact 3 out of 63, if you include the group above, can afford the product priced at $4 to $5. The bottom line indicates that 32 out of 63 people can afford the product if priced belwo $1. Which means that the entire population can afford the product. Luxury goods have a slightly different behaviour as the upper segment may not consider purchasing item s affordable to the poorer groups.

There are other possible distribution of wealth as shown on the next page.