Hi Sveva,

I would be happy to provide the solution:

• If the life expectancy in the US is 75 years and initially no growth is assumed, in a simplified world, each year, all people who are 75 years old would die, and the same amount of babies would be born.
• Therefore, when an equal age distribution is assumed, you can simply divide the total population by the life expectancy to know the amount of people who would die, and the amount of babies who would be born.

Best,

Hagen

(edited)

Hagen said it well! It does seem a bit odd, but the key is that you have to make some strong assumptions:

• An equal age distribution (i.e., same amount of people aged 1 year, 2 years, 3 years,… etc.)
• Everyone dies at the age of life expectancy
• No population growth

Suppose life expectancy is 75. Then there's an equal number of people aged 1,2,…,75. Then when you divide the total population by 75, you get the total # of people in each age cohort. Assuming an equal age distribution, that must also be the number of people that will be born this year. That is, everyone who is 75 dies, but they are replaced with an equal number of newborns.

Hi Sveva,

This is a very important concept known as replacement rate - make sure you learn it as there are many other applications!

For example, if the average person buys a mattress every 10 years, and there are 10 people on the planet, then 1 mattress is bought every year. As in, I buy 1/10th of a mattress every year.

This concept is being applied to population…if lifespan is 75 and there are 75 people, then 1 will be born every year.

Yes, this does not account for the population pyramid and ageing vs. growing populations, but in market sizing it is a fair estimate.