Worsening terms of trade. Unstable Export Markets Exports are mainly primary products. Market instability Costa Rica's coffee export market. Market characteristics supply perfectly inelastic supply curve vertical demand for coffee highly inelastic demand curve close to vertical. Figure 8.1a Market effects of a change in demand.
Higher prices lead to expansion of coffee industry supply increases price falls.
Worsening Terms of Trade Terms of trade determine division of gains from trade. Prices of primary products have fallen relative to other prices. Arguments by developing nations. Primary markets competitive. Markets for manufactured goods and services not competitive.