Refers to price of exports relative to price of imports. If terms of trade increase, then overall welfare increases.
As an example: 2000s commodity price boom: Fuel, metals, chemicals.
This led to an increase in terms of trade in many developing countries, especially in BRICS countries. Looking at copper, the increase of prices of electrical goods increased the price of copper, increasing terms of trade for developing countries and thus welfare.
In format Pc/Pf