Editing Terms of trade (section)

==Two country model CIE economics==
In the simplified case of two countries and two commodities, terms of trade is defined as the ratio of the total export revenue{{Clarify|date=December 2010}}  a country receives for its export commodity to the total import revenue it pays for its import commodity. In this case, the imports of one country are the exports of the other country. For example, if a country exports 50 dollars' worth of product in exchange for 100 dollars' worth of imported product, that country's terms of trade are 50/100 = 0.5. The terms of trade for the other country must be the reciprocal (100/50 = 2). When this number is falling, the country is said to have "deteriorating terms of trade". If multiplied by 100, these calculations can be expressed as a percentage (50% and 200% respectively). If a country's terms of trade fall from say 100% to 70% (from 1.0 to 0.7), it has experienced a 30% deterioration in its terms of trade. When doing longitudinal (time series) calculations, it is common to set a value for the base year {{Citation needed|date=January 2008}} to make interpretation of the results easier.

In basic [[microeconomics]], the terms of trade are usually set in the interval between the opportunity costs for the production of a given good of two nations.

Terms of trade is the ratio of a country's export price index to its import price index, multiplied by 100.
The terms of trade measures the rate of exchange of one good or service for another when two countries trade with each other.