Why can you buy a Happy meal for 2.99 in US, but its 5.49 in Canada, when the Cdn dollar is worth more now?

Question

The question is just a tiny piece of a larger question I suppose and that is.. why does everything in Canada still cost so much when our dollar is beating the american dollar lately? Its not just Happy meals from McD's, but its Cars, clothes too(you can buy a sweater from american eagle online, and if i buy it from the US instead of Canada I save money).

That all said, what is the reason our dollar isnt influencing our economy, and are we suckers for letting it happen?

Also, some of you are saying "because you have free healthcare".. this is not true, I pay $44 a month for healthcare in AB, and I pay $36 for extra coverage from work.

Answer 1

Well lets take an accounting: The U.S. dollar was highter and we as the guppies we are were told the higher price for goods was result of the exchange rate of the U.S. dollar. obviously this is not the truth and has never been the truth. There for the government and the powers that be had been caught in a lie. But that is not really that unusual being Canadian. You should talk to your M.P. and ask the same question and dont give up with out a reasonable explaination as to why the governments have not done more about this for many years.

Answer 2

Happy Meal Canada

Answer 3

That's a good question and I've seen elsewhere that this is annoying Canadians. Actually, it is very unrealistic to expect most things in Canada to get cheaper just because of what the exchange rate is doing. There are at least a few things contributing to what you see:

1) Canada obviously imports some things, but the vast majority of goods and services in Canada are produced with Canadian labor, and other costs that business have are Canada-based (ie, leases, taxes, utility bills etc). A rising Cdn dollar does not affect those costs, because they are priced in Canadian currency. Wages for Canadians are the same in Canadian dollars as before -- Canadians are not taking 30% wage cuts just because the Cdn Dollar is up 30%, get it? So for the most part Canadian business are all facing the same costs as before, so you shouldn't expect them to lower prices.

In other words, a happy meal is not made in America and exported to Canada. It is made on site by Canadians getting paid in Canadian dollars, in a building whose lease is paid in Canadian dollars, by a franchise business that pays taxes in Canadian dollars, etc etc. So why would the store magically drop its price tag by 30% and eat losses while you eat hamburgers?

2) Prices are based on supply and demand, not import costs. A business will seek the best price it can get, as long as it can sell its inventory. Since Canadians are receiving the same sized paychecks as before (see above), they're probably willing to continue to pay the same price tags they are accustomed to paying. They're not suckers for that.

3) Now that explains why things aren't GETTING CHEAPER right now, but why have some things ALWAYS seemed more expensive relatively speaking to Canadians? The answer is that the US economy is more productive than the Canadian economy.

Canadians often get upset when you say that, but it's not an insult, and don't take it personally, and there is not an economist in Canada who would argue the point. On average, a day of work for an American worker produces greater value added (revenue - costs) than for a Canadian worker. A million dollars of invested capital produces more revenue in the US than in Canada. So relatively speaking, A years' pay for an American buys more stuff, because a year's work for an American PRODUCES more stuff.

That does not mean everything in Canada is more expensive than in the U.S. -- prices for different things are affected by lots of factors -- but this is the basic reason that many things seem more expensive to a Canadian than they'd seem to an American, regardless of the exchange rate.

Answer 4

The change in the exchange rate will only effect the price of goods imported from the US, not domestic production, or things imported from most other counties. There are existing inventories and and contracts so even these prices do not adjust instantaneously.
There are many reasons for cost of living differences in different geographic locations. Part of it is due to taxes, but transportation cost, and real estate values and even climate can also play a large role. It cost twice as much to live in New York City as it does in Iowa and Iowa is more expensive than Mississippi. However flying between major cities is much cheaper than flying to Iowa. Buying on-line is usually cheaper in the US also even after you pay for shipping costs, but the price differential remains because many people want to try on a sweater before they buy, so pay extra to go to a local store.

Here is a link to Big mac prices for several years in many countries including Canada. Economist do not full understand the reasons for the large variations..
http://research.stlouisfed.org/publications/review/03/11/pakko.pdf

Answer 5

Because you probably earn more money in Canada thus you higher wage dictates a higher cost of living. In relative terms the cheeseburger is probably cheaper because Canada has a different tax system so the tax you pay on the burger is higher. In the US taxes are low because most things are user pays meaning you have to pay for your own health care but burgers are cheap. If they gave free health care then taxes would increase.

Answer 6

They have a more Socialist system than the U.S., which is less efficient, and has additional community costs and benefits(taxes).

Also, exchange rates don't always have a direct correlation with the Purchasing Power... which is why you normally consider the adjustment for PPP(Purchasing Power Parity) also, when considering business opportunities

Answer 7

LMAO, yeah our WMD is a 24 of beer and good ganja. Our flag is a Maple Leaf and it is red and white. Our Liberal party, don't ask! LOL As for Celine, you can keep her in Vegas! Oil you say, what oil, ask them Blue eyes shieks living in Alberta. Notice too I didn't say eh at the end of each sentence..LOL I AM Canadian..

Answer 8

b/c you're paying for public healthcare and social services, which are way bigger in Canada.

I do not mean just sales tax, I mean income taxes of everybody who helped make the Happy meal - farmers, wholesalers, food factories, McD employees and landlord.

Answer 9

1

Answer 10

well, i don't know if this is the actual cause, but I see it like a built in tax to pay for the benefits you enjoy... like free healthcare and cheap medicine.