The reciprocal demand elasticity refers to the ratio of proportional change in the quantity of imports demanded to the proportional change in the price of exports relative to the price of imports. Thus, elasticity of reciprocal demand
Where,
e = Elasticity of reciprocal demand
ΔM = Change in quantity of imports
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ΔPX = Change in price of exports
ΔPm = Change in price of imports
If e >1, then terms of trade will be favourable for the concerned country and its share of gain will be larger; if e <1, terms of trade will for the concerned country and the share of gain will be relatively less; if c = 1, the gain from trade will be equally distributed between the two countries.