Terms of Trade related to the Interchange between Productive Resources:

1. 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).

2. 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. Here, F represents import index (which is measured as the index of cost in terms of quantity of factors of production employed per unit of imports).