Terms of trade deteriorating in less developed countries, Business Economics

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Why are the terms of trade deteriorating for Less Developed Countries?

Problem: The substantial decline within real commodity prices and the deterioration into the terms of trade has been a main factor into worsening the trade into goods of several developing countries

• The price elasticity of demand (PED) for agricultural goods counting cash crops as coffee is price inelastic. When LDCs rises the supply price falls through a larger percentage.

• Furthermore the income elasticity of demand (YED) for the agricultural products is some low. World income grows the demand for agriculture rises through a smaller amount.


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