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 Form 4 Business studies lessons and notes on international trade

Reasons for differences in terms of trade between countries

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Answer Text:
Reasons for differences in terms of trade between countries
The terms of trade may differ due to:
i. The nature of the commodity being exported. If a country exports raw materials, or unprocessed agricultural products, its terms of trade will be unfavourable, as compared to a country that exports manufactured goods.
ii. Nature of the commodity being imported. A country that imports manufactured goods is likely to have unfavourable terms of trade as compared to that which imports raw materials or agricultural produce.
iii. Change in demand for a country’s export. An increase in demand for the country’s export at the world market will make it have favourable terms of trade as compared to those with low demand at the world market
iv. Existing of world economic order favouring the products from more developed countries. This may make the developing countries to have deteriorating terms of trade
v. Total quantity supplied. A country exporting what most countries are exporting will have their products trading at a lower price, experiencing


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