When the "richs"* get richers, the "poors"* get poorer... assuming:
h1) a constant volume of money,
h2) a constant volume of people,
h3) a close separation between the two groups of people,
h4) a constant influx of money from rich to poors (salaries) c1, and a constant influx of money from poors to rich (profits from stuff sold to poors) c2, such that c2 > c1
this means that the volume of money the richs have access to gets bigger over time and the volume of money the poors have access two gets smaller, therefore, also assuming:
h5) constant prices,
this means each person in this poor group has individually access to a smaller amount of money. Therefore despite a constant salary, they can afford to buy less things.
Could we therefore says that richs experiment a deflation and poors an inflation? If not, is there a more befitting name to describe this phenomenon?
Are the assumption realistics, or is the reasonment flawed?
- 100 persons, divided in R and P, with respectively 20 and 80 persons
- 1000 euros total volume of money
- time t1: R has 500 euros, P has 500 euros
- time t2: R has 700 euros, P has 300 euros
- the prices remain constant at t1 and t2, e.g. 1 euros bread, 2 euros meat, 3 euros gas
at t1: people in P and R have on average respectively 25 and 6.25 euros
at t2: people in P and R have on average respectively 35 and 3.75 euros
therefore, despite constant salaries for people in P:
at t1 they can afford both bread, meat and gas
at t2 they can afford only bread and meat
*: I put quotation marks, because being rich or poor is subjective, but within a closed social group we can assume that such a distinction can be agreed upon.