The Singer-Prebisch theory argues that developing countries' terms of trade deteriorate steadily over time because of
A) greater demand for primary commodities versus industrial goods.
B) higher costs of primary commodities versus industrial goods.
C) less demand for industrial goods versus primary commodities
D) greater government protection for primary commodities versus industrial goods.
E) less demand for primary commodities versus industrial goods.

Question

Quizplus · Accepted Answer

The Singer-Prebisch theory posits that over time, the terms of trade deteriorate for countries that specialize in primary commodities due to a lower income elasticity of demand for these goods compared to industrial goods, leading to relatively less demand for primary commodities versus industrial goods.

The Singer-Prebisch Theory Argues That Developing Countries' Terms of Trade