townsfolk vs municipality

townsfolk and municipality both are nouns.

Word	Noun	Adjective	Verb	Adverb
townsfolk	Yes	No	No	No
municipality	Yes	No	No	No

As nouns, municipality is a hypernym of townsfolk; that is, municipality is a word with a broader meaning than townsfolk:

townsfolk (noun)	municipality (noun)
the people living in a municipality smaller than a city	people living in a town or city having local self-government
	an urban district having corporate status and powers of self-government