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.