2 units of rice i.e. she will be prepared to give anything up t {two units of rice in exchange of wheat. This is the uppermos| limits of term for Brazil, (Gi) Elasticity of Demand for Imports and Exports This is a significant factor which has effect upon the terms of trade. Terms of trade will be favourable if « country’s demand for exports is more elastic when compared to her demand for imports; terms of trade will be unfavourable if reverse is the case. (iii) Competitive Conditions If a participating country enjoys the status of monopoly or oligopoly in respect of the goods it produces and exports; and if there is abundant sources of supply of import: that country would have a favorable terms of trade, Example OPEC. (iv) Capital Inflows and Outflows A country has to redeem her foreign debts in terms of Tequisite foreign currencies. This forces the country to sell the domestically produced goods in order to acquire the foreign currency.’ Similarly when a country borrows from hard currency countries, there is an increase in demand for g00ds of creditor countries and pushes up their prices and this in turn influences terms of trade. (¥) Balance of Payments Positions A country may resort to devaluation or deflation policy to check her continuous adverse balance of payment position and this would in turn make the terms of trade go against her (vi Tastes and Preferences Changes in consumers-tastes and preferences may also cause changes in terms of trade. Take for instance, if the tastes of English men change in favour of India's readymade garments, it will turn the terms of trade more in favour of India, (vii) Technological Changes i t ? 2 ‘Technolo, Luppermost limits of terms of trade. I improve merits alter the lowermost and For example, assume India can produce 600 units of at or 300 units of rice in 'x! number of man days [note in it was 300 & 240 respectively. It implies that India is red fo accept anything above 1/2 units of rice and not 1 in the case of our previous example in (i). ii) Tariffs Imposition of tariffs by a country on the quantities of jorted goods influences terms of trade, This situation occurs particularly exporting country’s id is compared to the demand of the country imposing itt. fauses jeveloping Countries of Unfavourable Terms of Trade for ‘There is a general feeling that the term trade is normally Wourable to developing countries. In other words, these countries have to supply more ids and services in real terms for a given import of iufactured goods from the rest of the world. Below are the jortant reasons for unfavourable terms of trade for loping countries, Developing countries are generally exporters of primary products agricultural products and marine products, etc, Most of these products have inélastic supply in so far as supply cannot be reduced at will when prices are low. An unfortunate thing with these primary producers in that when prices are high they cannot benefit much because supplies cannot be increased, When production is high due to favorable natural conditions they do not benefit because prices come down greatly. Developing countries are not organised into pools or cartels whereby they can control supplies and fix prices which are remunerative and are in tune with the price changes of manufactured goods. An only exception to