quantity of import can be consumed by a country, then one can say that terms of trade are favourable. Income Terms of Trade The income terms of trade was given by G.S.Dorrance in . It is the index of the value of exports divided by the price index for imports multiplied by quantity index of exports. In other words, it is the net barter terms of trade of a country multiplied by its exports-volume index.
T y = (P x / P m )Q x Where, P x = Price index of exports P m = Price index of imports Q x = Quantity index of exports . . . Terms of Trade related to the Interchange between Productive Resources The Single Factoral Terms of Trade Viner has devised another concept called ‘‘the single factoral terms of trade’’ as an improvement upon the commodity terms of trade.
It represents the ratio of export-price index to the import- price index adjusted for changes in the productivity of a country’s factors in the production of exports. Symbolically, it can be stated as T f = (P x / P m ) F x Where, T f stands for single factoral terms of trade index. F x stands for productivity in exports (which is measured as the index of cost in terms of quantity of factors of production used per unit of export). Double Factoral Terms of Trade Viner constructed another index called ‘‘Double factoral terms of Trade’’.
It is expressed as T ff = (P x / P m ) (F x / F m ) which takes into account the productivity in country’s exports, as well as the productivity of foreign factors. - - International Economics