Posted in Marketing and Strategy Terms, Total Reads: 488
Definition: Demographic Equation
Demographic equation is the mathematical equation which helps determine the change in population over a period of time. It is the number of births minus deaths plus or minus the net migration. The basic demographic equation looks like:
Population(t+1) = Populationt + Natural Increaset + Net migrationt
Natural Increaset = Birthst – Deathst
Net migrationt = Immigrationt - Emigrationt
Populationt is a country’s population at time t;
Population(t+1) is the population at time (t+1);
Natural Increaset is the increase from time t to (t+1);
Net Migrationt is the migration from time t to (t+1).
This basic equation can also be applied to sub populations like nationalities, ethnicities, etc. Hence, while segmenting a market, this equation can also be applied to different segments of the market. The demographic equation is used to help tracking the population changes so that demand changes can be tracked accordingly. Depending on the increase or decrease in demand, a business can decide if it has to increase or decrease marketing expenses in that particular area, and estimate the amount of increase or decrease accordingly.
For example, the United States shows how population change is affected by the rate of natural increase and net migration. The fertility rate or the rate of increase in the number of births in the United States is almost exactly equal to replacement level i.e the number of deaths, but migration into the country is high enough to lead to population growth.