Elasticity of demand for exports & Imports

Law of demand: all else being equal, as the price of a product

increases(), quantity demanded falls(); likewise, as the price of a
product decreases(), quantity demanded increases().There is
an INVERSE relationship between quantity demand and its price.
Price elasticity of demand (PED or Ed) is a measure used in economics
to show the responsiveness, or elasticity, of the quantity demanded of
a good or service to a change in its price.
Ed=0 demand perfectly inelastic
Ed=infinity demand perfectly elastic

 Elasticity of demand depends on nature of product: Necessity good, semi

luxury good and luxury good.
Demand of necessity goods dont change with fluctuation in the prices of goods
which can be due to change in exchange rates, e.g. Demand for oil by India is
roughly inealstic in short run
Demand for gold is elastic, demand for gold imported in India fluctuates with
fluctuations in exchange rate.
Fluctuations in exchange rate affect the demand for exports and imports of good.
When currency of a country weakens against currency of another country they
prefer exporting, where as when currency appreciates they prefer importing.

Size Of the Country

The process of production is characterized by economies of
scale which results in falling of price and better quality for
larger quantity of good produced.
Countries which are technologically updated can go for
economy of scale and as well as economy of scope.
production cost is lower in export oriented countries
because of cheap labor and capital.
The domestic market of developed countries at times get
saturated with certain kind of products which reap benefits,
so they look for new market in developing countries.
Example export of Mi3 phones to India.

Nature of Production

If a country is producing only primary products for the exports, and

has to import manufactured goods in exchange, then the terms of
trade for that country will be unfavorable .
For example :- during colonization period imperial countries
imported primary products and raw material from their colonies
and exported manufactured good in return in-order to reap profit
out of trade.