Consumers have become wise and they will not go to the market to purchase goods
simply because they need them. Consumer research has become the trend such that consumers
will use websites and other sources of data to know where prices are lower. For instance, for
those who prefer doing their shopping online it becomes easy to do comparisons so that they can
get the same products at lower costs. Although Canada and the United States are developed
economies, they have shown a big disparity in their prices for different services and products
(Anderson et al. 2003; Squires, 2012). This has become an important topic for study because of
increased globalization and the opening up of a global market whereby consumers will be able to
purchase goods in other countries without any restrictions. The question that has been raised by
many people is whether the prices in the US are higher than in Canada (Danzon & Furukawa,
2003; Ferraro, Rogoffn & Rossi, 2012). The results are mixed and thus, this paper will give a
comparison for the prices of products and services between the two countries and give
explanations for the same.
Comparison of the prices
A study carried out in 2013 aimed at analyzing the cost of living in both countries found
varied differences between the two (Gopinath et al. 2013). The first thing that the study looked at
was the consumer prices and it was found that they were 11.73% lower in the United States than
in Canada. This is a big gap considering that the two countries are industrialized. However,
scholars claim that the gap is narrowing down every year. The same study found that consumer
prices including rent were 7.33% lower in the US than in Canada. This can be interpreted to
mean that the rent prices in the United States are 4.12% higher than in Canada. Another
comparison was done in restaurant prices and it was evident that they were 13.80% lower in the
US than in Canada. The last comparison was done on groceries prices and it was found that in
the US they were 11.67% lower than in Canada (Gopinath et al. 2013). Therefore, the study
concluded that prices in Canada were relatively expected for rent prices that were higher in the
US. A comparison on market product prices gave the following data:
Markets In Canada In the US Difference
Milk (regular), I Liter 1.99C$ 1.10C$ -44.98%
Loaf of fresh white bread (500 g) 2.73C$ 2.65C$ -3.25%
Rice (white), 1 kg 3.68C$ 3.28C$ -10.73%
Eggs (12) 3.25C$ 2.50C$ -23.15%
Local cheese (1kg) 11.88C$ 10.43C$ -12.23%
Water (1.5 liter bottle) 2.01C$ 1.92C$ -4.16%
Oranges (1 kg) 3.43C$ 4.07C$ +18.66%
Apples (1 kg) 3.42C$ 4.16C$ +21.53%
Tomato (1 kg) 3.42C$ 4.18C$ +22.32%
Table 1: Comparison of market prices in the United States and Canada
Financial institutions have developed interest in understanding why consumers are opting
for goods in the US rather than purchasing the same goods in Canada. This is after they have
found that many of the consumers are paying for goods online yet the goods are not in Canada.
The issue has caught the attention many economists too (Ferraro, Rogoffn & Rossi, 2012).
Through this they have raised a fundamental problem which is interpreted to mean that Canada
as a country carries the same weight and sales potential like a state in the US. For instance,
California on its own has a higher sales potential than Canada (Danzon & Furukawa, 2003;
Squires, 2012). Therefore, Canada is not a volume market and thus, companies will look to make
a higher profit for a single item in Canada than they would in the states. The retail market in
Canada is less competitive and thus, the consumer bargaining power is low. Therefore, it is a
price war set by the companies or the manufacturers because they are after profits.
The way many Canadians do their shopping annually shows clearly that the prices of
goods in Canada are higher than in the US. Cross border shopping trips have continued to
increase annually. This is in favor of the United States because the number of Americans
crossing to Canada has been decreasing. Americans travel to Canada because of tourism, but
their number has been shown to be lower than the number of Canadians crossing to the US. Most
of these Canadians are from Ontario, British Columbia, and New Brunswick (Compton et al.
2011; Ferraro, Rogoffn & Rossi, 2012). They travel mostly during the night so that they can do
their shopping during the day and return again during the night. The traveling shows that there is
a big price gap between the shoppers are paying for their fare to and from the markets in the US,
and still they find it cheaper than getting the goods in Canada. This has also been shown in the
case of gas where one would cross the border to refill gas in the US, yet they are incurring an
additional use of the gas when traveling to the gas points in the US (Squires, 2012; Stokes et al.
2011). This shows clearly that the gas prices between the two countries are very high.
From research it is evident that an average Canadian will spent more on tax than food and
shelter. The Canadian government has an ineffective taxing system. This is the reason some
products like oil and gas will fetch higher prices in Canada than in the US. Canadian families are
forced to spend much on products than US consumes. According to Woolhandler, Campbell &
Himmelstein (2003) the US government is effective in its taxing because much of its tax is got
from workers. The workers’ pay a higher tax which helps to cut down on the tax that would be
imposed on consumer goods. In Canada it is not the case as the workers will get a higher pay, but
will have to pay more for goods. This also explains why employers in Canada are highly paid
than workers in the US. A health officer in the US will get a lower pay than a health officer in
Canada, but when it comes to spending the US health officer will take home more goods with the
same pay (Ferraro, Rogoffn & Rossi, 2012; Stokes et al. 2011). Consumers in Canada have
complained about this for long, and it clearly shows that the prices of products and services are
higher than they can afford.
One would expect that a manufacturer in China or in Europe will sell products to retailers
in Canada and in the United States at the same price, but this is not the case. Multinational
brands have shown that they have two different price lists for the two markets. In most cases they
claim that the prices for Canada are 10 to 50 per cent higher than the prices in the US (Compton
et al. 2011). This means that the final sale price will have to be higher for the Canadians than for
the Americans. A marketplace investigation found that a bottle of Bayer Aspirin in Wall-Mart
stores costs $5.96 in the US and when sold by the same corporation in Canada it costs $13.86
(Ferraro, Rogoffn & Rossi, 2012). This is a difference of 132 per cent yet it is the same company
that is selling in the two countries. The manufacturers further claim that prices are local and
depending on the local market conditions the US market is favored when it comes to pricing.
This is because of varied reasons and one of them is the competitive nature of the markets. The
American retail markets are competitive as there are many alternative products. This means that
a company must lower its prices so that it can get a competitive advantage. In Canada this is not
the case as the market is uncompetitive and therefore, the manufacturers will take advantage of
this to sell products at higher prices (Danzon & Furukawa, 2003). Therefore, the prices in
Canada are higher than in the United States because the manufactures themselves acknowledge
A study that was carried across different markets in Canada showed that the retailers
were not comfortable with the prices they got from the manufacturers. Many of them had
complained to their manufacturers, but all they were told is that if they were not comfortable
with the line then they should not buy it. This shows that the retailers in Canada are powerless
and have to abide by what they are told by the manufacturers (Squires, 2012; Stokes et al. 2011).
In the US this is not the case because there are many manufacturers and the retailers have the
power to choose whoever they want. In fact it is the manufacturers in the US who are suffering
as they find means of cutting down on input costs because they will not sale if they increase the
price. This explains why it becomes challenging even for the Canadian government to address
the issue of high prices because the power lies in the big corporations (Ferraro, Rogoffn & Rossi,
2012). This is also the reason why Canadian has lost hope in the government and has opted to do
their shopping in the United States.
Reasons why the prices in the US are lower
One of the main reasons why the prices of products and services in the US are lower than
in Canada is because of the high value of the US dollar. The US economy has strongly been built
by its high value for its dollar (Squires, 2012; Ferraro, Rogoffn & Rossi, 2012). Compared to
developing nations such as those in Latin America the value of the American dollar is relatively
high. In the case of Canada the US dollar has a higher value. Therefore, the goods that one would
purchase using the dollar will vary between the two countries. For instance, if it is milk a
Canadian may purchase half a liter using the US dollar, but when he crosses to the US he buys a
full liter. The amount spent is the same, but the quantity of goods purchased is higher (Anderson
et al. 2003). This is probably the reason why many Canadians will cross the border annually to
go and purchase clothing, electronics, and other goods in US markets.
Another reason why the prices in Canada are higher than in the United States is because
majority of the “high-profile” goods consumed are manufactured in the United States. For
instance, cars and many electronics that are consumed in Canada are from the United States and
the rest from China and European nations (Stokes et al. 2011). Therefore, the manufacturer in the
United States will incur an additional charge transporting the goods to retailers in north Canada.
Therefore, for the person in the United States who is closer to the manufacturer the prices will be
lower. On the other hand, the prices for the Canadians will depend on how one is closer to the
border. For people living in north Canada the prices of electronics will be higher than those of
people living near the border to the south (Ferraro, Rogoffn & Rossi, 2012). This is explained
through transport costs that the manufacture will incur.
In the United States there are better deals when it comes to purchasing of varied goods.
The price of a good may be the same in the US and in Canada (Jacoby, O'Sullivan & Paltsev,
2011). This is more for the products that are manufactured in other countries for instance the
Chinese goods. However, the retailers in the US will have better deals to their customers. Some
of these deals are discounts, additional products whereby customers are told that if you purchase
this you will get this. There are also loyalty cards in the US which have become common among
retailers (Galopith et al. 2013). Therefore, a customer in Canada may pay the same for a good
like a customer in the US, but the customer in US gets an additional offer. This will simply mean
a lower price for the initial product because the additional product or discount is not paid for.
The labor costs that manufacturers incur in Canada are higher than they do in the United
States. This is because employees in Canada are highly paid than in the US. This means that
manufacturers will incur higher costs when they involve labor in Canada (Gopinath et al. 2013;
Jacoby, O'Sullivan & Paltsev, 2011). If we look at the case of a small company in New York that
makes chocolate, the company is likely to sell the final products at a lower cost compared to a
similar company operating in Canada. This is because the labor costs are high (Danzon &
Furukawa, 2003). Therefore, the Canadian company has to sell at a higher price so that they can
be able to get profits. In contrary the US Company is paying less to its employers and the input
costs are also low since labor is cheap (Ferraro, Rogoffn & Rossi, 2012). Labor is an important
factor of production and therefore, it being expensive in Canada helps to explain why the prices
of their products will be higher.
In conclusion, the statement that prices in the US are higher than those in Canada is
wrong. There is a history where consumers in Canada have had to pay more for goods and when
they cross to the US the prices are lower. For instance, the gas price in Canada is relatively
higher than it is in the US. This has annoyed Canadian consumers; however, the gap is becoming
sizeable. If the Canadian dollar continues to earn more value in the global economy then it will
mean that Canadians will pay eth same for products regardless of whether they buy in the US or
in their home country. In the nearby future the prices may equalize. This is because the
consumers in Canadians will continue to fight for their consumer rights so that they can be able
to buy directly from the US. This will force the retailers in Canada to lower their prices so that
they can compete with the retailers in the US. The government also needs to intervene in the
matter because if consumers continue to get products from US markets the Canadian economy
will be affected. On the other side they will be helping to build a strong US economy.
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