Gains accrue to all the participating countries in international trade. As NOTED by Jacob Viner, the classical economists usually adopted the following alternative criteria of measuring the gain from trade accruing to an individual country:

1. Reduction in the Cost of Production.
2. Enhancement of the Real Income.
3. The nature of Terms of Trade.

In short, an index of cost reduction or improvement in the MARGINAL physical product of labour can be used as a criterion for measuring the gain from international trade.
Thus, the gain from trade may be measured as under: G = Ca - Cb

Where,

G stands for the gain;
Ca stands for PER unit cost of production after trade;
Cb stands for per unit cost of production before trade.
If G is negative, it suggests cost economy to that extent.

Similary, the other method may be given as under:

G = MP Pa - MPPb
Where,
MP Pa refers to the marginal physical product of labour after trade.
MPPb refers to the marginal physical product of labour before trade.
The positive magnitude of Gi thus, implies a gain to that extent.

A second criterion, the real income criterion follows from the first that to the extent the real income or the net national product of the country increases on account of international trade, may be regarded as the gain from international trade. Thus:

G = Ya-Yb

Where,

Ya stands for the national income after trade.
Yb stands for the national income before trade.

The LAST criterion, the terms of trade index, of measuring gain is, however, the most celebrated one. Terms of trade refer to the RATIO of export price (Px) to import price (Pm) of a country -

Gains accrue to all the participating countries in international trade. As noted by Jacob Viner, the classical economists usually adopted the following alternative criteria of measuring the gain from trade accruing to an individual country:

In short, an index of cost reduction or improvement in the marginal physical product of labour can be used as a criterion for measuring the gain from international trade.
Thus, the gain from trade may be measured as under: G = Ca - Cb

Where,

G stands for the gain;
Ca stands for per unit cost of production after trade;
Cb stands for per unit cost of production before trade.
If G is negative, it suggests cost economy to that extent.

Similary, the other method may be given as under:

G = MP Pa - MPPb
Where,
MP Pa refers to the marginal physical product of labour after trade.
MPPb refers to the marginal physical product of labour before trade.
The positive magnitude of Gi thus, implies a gain to that extent.

A second criterion, the real income criterion follows from the first that to the extent the real income or the net national product of the country increases on account of international trade, may be regarded as the gain from international trade. Thus:

G = Ya-Yb

Where,

Ya stands for the national income after trade.
Yb stands for the national income before trade.

The last criterion, the terms of trade index, of measuring gain is, however, the most celebrated one. Terms of trade refer to the ratio of export price (Px) to import price (Pm) of a country -