47974497 unit vi terms of trade
DESCRIPTION
Terms of TradeTRANSCRIPT
Unit VI - Terms of trade
Day and Date:
Unit Highlights…
Terms of trade
Factors affecting terms of trade
Text book reference chapters…
International Economics by Dominick Salvatore – Chapter 4 & 11
International Economics by Francis Cherunilam – Chapter 7
Terms of Trade…concept
Ratio of the price of its export commodity to the price of its import commodity.
Terms of Trade…types
Commodity/net barter terms of trade Gross barter terms of trade Income terms of trade Single factorial terms of trade Double factorial terms of trade
Terms of Trade…Commodity/net barter terms of trade
The ratio (expressed as a percentage) of relative export and import prices when volume is held constant.
Terms of Trade… Gross barter terms of trade
The ratio (expressed as a percent) of a quantity index of exports to a quantity index of inputs.
Terms of Trade…Income terms of trade
The ratio (expressed as a percent) of the value of exports to the price of imports.
Terms of Trade… Single factorial terms of trade
Net barter terms of trade adjusted for changes in the productivity of exports.
Terms of Trade… double factorial terms of trade
This adjusts for both the productivity of exports and the productivity of imports.
Factors affecting Terms of Trade
Dependency on foreign sourcing Relative competitiveness in production PESTLE aspects of business environment -
intra-country and the rest of the world
To conclude…
Economic efficiency is enhanced when nations engage in mutually beneficial exchange.
You should now be able to,
Explain the concept and types of terms of trade.
Identify factors that determine favorable terms of trade.