How does income distribution affect demand for basic products?

Higher inequality increases demand for basic products because, in a society with significant income disparity, those with lower incomes tend to spend a higher proportion of their earnings on essential goods and services. Basic products, such as food, clothing, and household necessities, are typically non-discretionary expenditures.

When income distribution becomes increasingly unequal, lower-income households are compelled to allocate most of their limited resources to satisfy their basic needs. As a result, even if the wealthier segments of society spend differently, the consistent and often rising demand from lower-income groups drives up the overall demand for these essential items. This scenario reflects a fundamental aspect of consumer behavior: regardless of income level, basic needs remain a priority, resulting in sustained or increased demand for such products in times of higher economic inequality.

This understanding is important in considering economic policies aimed at addressing inequality, as these policies could have an impact not only on social equity but also on the demand dynamics of basic goods in the economy.