Terms of Trade (Agriculture vs Non-Agriculture)
Definition
Terms of Trade (Agriculture vs Non-Agriculture) refers to the ratio of prices received by the agricultural sector to the prices paid by it for non-agricultural goods and services. It indicates whether agriculture is gaining or losing in exchange with the non-agricultural sector.
Formula
Terms of Trade (ToT) = ( Price Index of Agricultural Products ÷ Price Index of Non-Agricultural Products ) × 100
ToT > 100 → Favourable to agriculture
ToT = 100 → Neutral
ToT < 100 → Unfavourable to agriculture
Calculator
Used to study income parity between agriculture and non-agriculture.
