116 INTERNATIONAL TRADE

NTN

LH

It will be observed that wages in the United States have fallen, but
have fallen less than in the case just discussed: they have fallen
from $1.70 (the figure at the original equilibrium) to $1.65, but not
as low as $1.60. German wages on the other hand have risen, but
not so much ; they have risen from $1.02 to $1.05, not to $1.15.
At the prices thus figured out, suppose :
U. S. exports to Germany 11 million wheat @ $0.82% = $9,050,000 !
Germany exports to U. S. 11.5 million linen @ $0.70 = $8,050,000

At the new price of $0.82% for wheat (lower than $0.85) Germany
takes a greater quantity — 11 million bushels instead of 10 million ;
and her total payment to the United States for wheat rises from
$3,500,000 to $9,050,000. At the new price of $0.70 for linen
(higher than $0.68) the United States takes a less quantity of linen
from Germany — 11.5 million yards of linen instead of 12.5 million;
 and her total payment to Germany falls from $8,500,000 to
$8,050,000.2 The new gross barter terms of trade, 7.e. the relation
of all the United States wheat to the German linen, then become
11 wheat = 111 linen, or 10 wheat = 10.45 linen.
Of the total export of wheat from the United States, however,
a part only serves to pay the tribute of $1,000,000; the rest pays
for the German linen. The apportionment of the wheat exports
for the two purposes is:

1.2 million wheat at $0.82% for tribute = $1,000,000
9.8 million wheat at $0.82% for linen = $8,050,000
$9,050,000
The net barter terms of trade are then:
9.8 wheat = 11% linen, or 10 wheat = 11.8 linen

Under the previous supposition, the net terms had been :
10 wheat = 10.4 linen

The United States now gets terms more favorable than before —
11.8 of linen instead of 10.4 linen.

1 Approximately.
2 Tt will be borne in mind that an elastic demand means that at a lower price a
greater quantity of units will be taken, and conversely at a higher price a less quantity.