Square GDP to get market size? I am trying to present a graphic that
depicts relative market size for various countries for a particular
product. GDP alone isn?t representative because in a very populous
country the per capita GDP may be very low and the people too poor to
purchase. GDP per capita alone isn?t representative because in a
country with a very high GDP per capita the population may be so low
as to not make marketing efforts worthwhile. My first inclination was
to represents a surface with vectors representing GDP. Per capita GDP,
and population and then describe a surface above which markets are
viable and below which markets are not. However thinking about this I
thought that maybe I could represent the markets as volumes, simply
multiply (GDP) X (Population) X (GDP per capita). This would give a
relative value of the 3 variables. BUT looking at this made me realize
that this value would be essentially GDP squared. Anyone ever heard of
this admittedly rough metric for estimating market size? Am I making a
logic mistake? Citations in the literature?

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Request for Question Clarification by pafalafa-ga on 07 Jan 2005 13:43 PST

It looks like you want a measure of the spending power of the non-poor
population of a country.  If you want to stick with easily-available
GDP data, I'd go with a simpler approach along these lines:

[(GDP/capita - $1,000) x population ] = national "market size"


The $1,000 figure is fairly arbitrary -- it could just as easily be
two or three thousand -- but it's there to "back out" the portion of
the population with little or no disposable income to speak of.  For a
very poor country with a small population, the total market size might
well come out around zero.

Try it, and see if the results pass the common-sense test.

Let me know.

pafalafa-ga

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Clarification of Question by sheph7-ga on 07 Jan 2005 15:04 PST

Thanks pafalafa... My question is about the validity of my GDP squared
approach. Not various or other ways to estimate market size using GDP.
 As I tried to explain this question came from an attempt to find one
number to allow me to say, for example; market A is twice as large as
market B. It seems wacky and I need to think this through but in the
meantime I am hoping someone will save me the effort... of thinking.