Of course there is still demand for smaller units like studios and one-bedroom units. Most are sold to investors who will try to either sell the units or rent them out. The chances of selling or renting out are getting less with every new condo being launched. Sooner or later the demand for such units will dry out because the market has been flooded with such unit types.
There is a difference between a real two-bedroom apartment and 2 one-bedroom units that have been merged. The blueprint of a real two-bedroom is very different from the blueprint of a merged. In a merged you have a lot of wasted area and you don’t have a real division of living area and bedroom area. You have the living room in the center and the two bedrooms to the left and right of it. Not really of advantage for a family. Usually the parents want to have their kids close to themselves, so they can easily get to the kids’ bedroom at night, without having to pass the living room, dining area and kitchen first.