Option 2 is correct, which arranges the parameters in descending order of their weights.

1. Income distance: This parameter is given the highest weight by the Fourteenth Finance Commission when distributing tax proceeds to the states. Income distance refers to the difference in per capita income between different states. It is an important factor to consider as it helps in reducing regional disparities and promoting balanced economic development.

2. Population: The second highest weight is given to population. This means that states with larger populations receive a greater share of tax proceeds. Considering population in the distribution helps ensure that states with higher population sizes can cater to the needs of their citizens.

3. Area: The third highest weight is given to area. This means that states with larger geographic areas receive a higher allocation of tax proceeds. Considering area helps in addressing the developmental needs of states with vast territories.

4. Demographic changes: The lowest weight is assigned to demographic changes. This parameter refers to factors such as fertility rates, mortality rates, and migration patterns. It helps in accounting for the changing demographics of states over time. While still important, this parameter is given the least weight compared to the others.

Hence, option 2 (1-2-4-3) correctly arranges the parameters in descending