Study And Analysis Of Commodity Markets Finance Essay - Free Essay Example

Sample details Pages: 12 Words: 3474 Downloads: 7 Date added: 2017/06/26 Category Finance Essay Type Analytical essay Did you like this example? A commodity market is a place in where basic, unprocessed (raw) materials and primary products are traded in exchange of money or other commodities. Our first key term is commodity in the definition. There five main categories of commodity that are traded: Grains: corn, wheat soybean, etc. Don’t waste time! Our writers will create an original "Study And Analysis Of Commodity Markets Finance Essay" essay for you Create order Energy Products: crude oil, heating oil, gasoline, natural gas, etc. Metals: gold, silver, platinum, etc. Softs: food and manucaturing products such as cotton, coffee, etc. Livestock And second key term is market. Trading activities (buying and selling) occur in regulated markets, that are called commodity exchanges, via standardized contracts; or in OTC (Over-the-Counter) markets via physical transactions. As it appears from the explanations, commodity markets are like equity markets. However, instead of buying and selling shares, participants buy and sell commodities. There are currently 48 large commodity exchanges trading approximately 100 different types of commodity around world. Another key term, that doesnt exist in the definition, is fungibility that is the best way to understand commodity markets. Fungibility is the property of a good or a commodity whose individual units are capable of mutual substitution. For example, there is no difference between gr apes in Buca and in ÃÆ'†¦Ãƒâ€¦Ã‚ ¾irince. And gold, it is same in China and in Turkey. Other examples of highly fungible commodities may be crude oil, wheat, orange juice, natural gas. How does fungibility help buyers and sellers? By this way: It allows them trade huge quantities of oil, frozen orange juice, cotton, wheat without considering who, where, when produces; as long as quality of the products meet certain guideliness. Agrarian products must be in raw form; for example wheat-not flour or corn-not cornmeal. Also for perishable commodities there are some certain guidelinesses, as well. For example; orange juice must have adequate shelf life in order to be traded in commodity markets. HISTORY OF COMMODITY MARKETS According to studies, commodity markets in Sumer were known as the oldest and the primitive form of todays commodity markets. Small baked clay tokens in the shape of sheep or goats were used in trade. Sealed in clay vessels with a certain number of such tokens, with that number written on the outside, they represented a promise to deliver that number of sheep and/or goat. Moreover, a promise included time and date of delivery. So that, the clay vessels were like a modern future contracts. In ancient Greece and Rome, The Agora and The Forum were served as distributions centers for commodities brought from different edges. After the fall of these civilizations, experiences on commerce were transfered to feudal times. Merchants, craftmen, promoters arranged regional fairs at fixed times and places to sell commodities more than food like gold, silver, spices, cloth, wood, etc. With these regional fairs, the immediate predecessors of modern future contracts that to arrive contracts s tarted to be used. These were simple agreements to purchase designated goods when they arrived by ship, and they were used for centuries when shipping was the primary mode of international trade. Number of traditional regional fairs was decreasing, as transportation and communication were becoming easier and faster. Specialized market centers; called Fourse, Boerse, Beurs; were developed in Europe, the USA and Japan. In 1700, Japanese merchants stored their rice in warehouses for future use in order to assure continous supply of rice. Warehouse holders sold receipt against the stored rice. They were called as rice tickets. The tickets were used as forward contracts. In early 1800s, in Chicago, farmers were producing crop, meat, milk, etc. and carrying the products from their villages to city centers. The supply was high and the demand couldnt match enough, so that the prices stayed at low-level. Moreover, there was no enough warehouse to store excess supply. The following year s, there were years of crop failure and extreme shortages. Although Chicago was a natural hub for trade, the trading was unefficient and unorganized until a group of businessmen formed Board of Trade of the City of Chicago. The Board offered a centralized location for cash trading of a variety of goods as well as trading of forward contracts. Members served as brokers who facilitated trading in return for commissions. These standardized forwards were essentially the first modern futures contracts. HOW A COMMODITY MARKET WORKS In this section, two distinct forms of commodity markets and their characteristics, and also trading processes are held in order to explain that how commodity markets work. Moreover, two main type of investors are compared for better understanding of commodity exchanges. The two distinct forms of commodity markets are OTC (Over-the-Counter) Markets and Exchange Based Markets (Standardized Markets). Firstly, an OTC market that is also called spot market has specific, small range of commodities depending on its geographical location; since OTCs are regional markets and participants are usually local people like wholesellers, farmers, processors, etc. Participants; for example, farmers or wholesellers; cannot trade in OTCs by themselves. Instead, broker of a farmer negotiates quantity, quality and price of a commodity with broker of a buyer on behalf of the farmer. When the brokers reach an agreement, physical delivery happens generally at that time or with a minimum lag because of delivery constraints. Thus, it can be said that almost all agreements in OTCs are delivery based. In determination of price of each commodity, the supply-demand principle is valid. If supplies meet demands, prices will be low. So that, buyers gain from the transactions made with sellers. On the other hand; if demands excess supplies, prices will soar. In this circumstance, sellers are expected to enjoy with high-level margin. Although, a participant predicted that prices would decrease or increase before, he/she cannot avoid his/her losses in today, in OTC market. Because the prices have been already determined by the market (based on the principle of supply-demand), not by the participant; and the participant cannot control the prices. Secondly, commodity exchanges that are also called as standardized commodity markets have crucial role in terms of trade volume and risk hedging in the two forms of commodity markets. Majority of derivative trading takes place in commodity exchanges. For that reason, commodity exchanges are supposed to be similar to equity derivative markets in their working. Briefly, a commodity exchange performs three valuable functions. It sets rules and regulations to promote uniform practices between buyers and sellers in the market. It provides the machinery for settlement of business disputes. It instantly circulates valuable price and market information to exchange members, their customers and other interested market participants. But, how does a participant trade in a commodity exchange? There are many types of commodities that are traded in the same commodity exchange, although certain commodies are usually traded in specific markets. Each commodity is traded in its own section by future contracts and, as in OTC markets, transactions and agreements are made by brokers; instead of farmers, processors, investors, wholesellers, etc. When a participant decides to buy/sell a future contract of spefic commodity with certain amount and defined qualitydelivery time at a desired price level, the participant let his/her broker know. Then, the broker converts the participants demand into transaction on behalf of him/her. After all, the participant has a future contract with a specific characteristic. In OTCs, all participants are supposed to make physical delivery at agreed time. However in commodity exchanges, most investors sell their contracts and take cash before delivery time. It has been observed world-over that only 2% of all the trades result in actual delivery. Why do investors use future contracts if they dont will to have the commodity physically? The answer is held below Impacts of Commodity Markets on Investors detailed. Lastly, there are two types of participant in commodity exchanges. One is hedger and the other one is speculators. Hedgers are primarily comprised of businesses that actually use the commodities they are trading. The essential aim of hedgers is to fix price of th e commodity they are trading until delivery time written on the future contract and to decrease their losses to minimum level because of unforeseen fluctuations in the spot market. Farmers, mining companies, wholesalers are examples of hedgers who use futures contracts as a kind of insurance for their businesses. However, speculators use future contracts only for making profit by using fluctuations of price levels. They are not interested in taking physical delivery of commodity. Speculators watch markets closely and forecast potential decreases or increases in the future in price levels. Then, they take long position (if prices are expected to rise) or short position (if prices are expected to fall) and if their forecasts come true, they gain from transactions they made. THE LARGEST COMMODITY EXCHANGES IN WORLD In the world there are lots of commodity exchanges that have some specific features and also have some common features. We can list some commodity markets from all over the world but in this section we will emphasize three largest largests commodity markets in whole world. New York Mercantile Exchange (USA) The New York Mercantile Exchange(NYMEX) is the largest commodity futures Exchange and it is located in New York city. It has two different divisions as NYMEX and COMEX. In earlier they have been managed by different companies but in 2008 NYMEX had bougth by same company that have COMEX and now they are managed by the CME Groups. CME Groups also owns Chicago Mercantile Exchange and Chicago Board of Trade. If we look at history, we can realize that commodity exchanges began with narrow perspectives. Some of Manhattan dairy merchants got together for trade of butter and cheese under the Butter and Cheese Exchange of New York. Then they added egg to their trade transactions. In 1882 they modified and add dried fruits,canned goods and poultry in the name of New York Mercantile Exchange. COMEX is younger than NYMEX. In 1933 National Metal Exchange, Rubber Exchange of New York, National Raw Silk Exchange and New York Hide Exchange got together to established COMEX. On August 3, 1994 , the NYMEX and COMEX finally merged under the NYMEX name. In NYMEX division the commodities that are sold and bought; coal, crude oil, electricity, gasoline, heating oil, naturel gas, palladium, platinum, propane and uranium. In COMEX division the commodities that are traded; aliminum, copper, gold and silver. The board of directors of CME Groups and NYMEX is same. Because as we mentioned before NYMEX is subsidiary of CME Groups. The Chief Executive Officer is Craig S. Donohue. He has been as member of board since 2004. Terence A. Duffy has served as Executive Chairman since 2006. Mr. Charles P. Carey has served as Vice Chairman for CME Groups. These people are just three members of board of director but there are other chairmans who has significance role in company. Tokyo Commodity Exchange (Japan) The Tokyo Commodity Exchange (TOCOM) has some different features in accordence to other commodity markets. Its basic difference is being non-profit organization. It regulates trading of future contracts and option products of all commodites in Japan. The future contracts include metals (gold, silver, platinum, aluminum, palladium), oil (crude oil, kerosene, gasoline). The option is about just gold. The Tokyo Commodity Exchange was established in 1951. This date is foundation of Tokyo Textile Exchange. This organization is approved of origin of trading commodities in Japan. Tokyo Rubber Exchange , Tokyo Gold Exchange and Tokyo Textile Exchange were merged into Tokyo Commodity Exchange. Tokyo Commodity Exchanges principal business can be defined as opening and operating commodity markets necessary for dealing in futures of the commodities listed (precious metals, rubber, aluminum, oil) on the markets based on the Commodity Exchange Act. Board of directors; CEO of TOCOM is Tadashi Ezaki ,Umetaro Nagao is senior executive managing officer and also it has eight more directors in board of directors. TOCOM is giving service to their members as forum which they can access fair prices and helps them who wants to hedge risk. TOCOM is largest commodity market in Japan. In 2009, 81.2% of all commodity futures were conducted in Japan, were handled by TOCOM. The other commodity exchanges in Japan like Tokyo Grain Exchange, Central Japan Commodity Exchanges and Kansai Commodity Exchange have little impact on market. From geographic view TOCOM has significance role in Asia commodity market. It leads Asias countries in accordance to trading commodites. They modifies commodities for needs of industries and reforming its markets desing. NYSE-Euronext (EU) NYSE Euronext Inc. Euro-American incorporation that operates multiple security exchanges. Generaly as known NYSE, Euronext and NYSE Arca are included NYSE Group. This group also has non-profit organization that Self Regulatery Organization for observing securitiy trade transactions within the NYSE Group. NYSEs origin relies on 1792, in New York city 24 stockbrokers signed Buttonwood Agreement and this agreement consists of base of trade policies between investors and issuers. In 2008 . NYSE Euronext welcomed to historic American Stock Exchange in worlds largest and most liquid Exchange groups. Combination of NYSE and Euronext are accepted a milistone for financial market by financier. NYSE completed its acquisition of Archipelago Holdings via a double dummy merger in 2006. NYSE Group became a profit organization and its securities are traded publicly under NYX ticker. Merger of NYSE and Euronext occured in 2007 and this event bruoght together Euro marketplace and American mar ketplace whose histories strected eachother for long time. The purpose of this combination is creating a huge market that combine worlds largest two markets. Threre is complex history of NYSE and Euronext. First of all NASDAQ acquired Londan Stock Exchange and then Deutsch Bà ¶rse. SEC controled and regulated this mergers. Merger process has gone on step by step and nearly all Euopan exhanges market combined to NYSE-Euronext. The major NYSE Euronext locations are ; Euronext Amsterdam(Amsterdam Holland), Euronext Paris(Paris France), Euronext Lisbon(Lisbon Portagul), Euronext.liffe(London England),   NYSE Arca(Chicago,  Illinois,  United States of America), NYSE, Headquarters(New York City,  New York,  United States of America), AMEX(New York City,  New York,  United States of America), NYSE Arca (formerly  Pacific Exchange), Euronext Brussels(Brussels,  Belgium  ). Regulation of NYSE Euronext; NYSE Euronext and Financial Industry Regulatory Authority(FINRA) made an agreement on 4 May 2010 about overseeing security exchanges and enforcement fuctions of NYSE Euronext. They announced this regulation standarts for NYSE subsidairies. FINRA controls that the NYSE subsidairies operations are suitable to NYSE Euronexts regulotary subsidairy of NYSE Regulation. During the 19th century NYSEs board of director are unsalaried persons who are willing to operate NYSE and also kepin a position as insurer or issuer. In 1938 they modified Exchange and brought it to more profesional condition and they conducted a reliable and more professional board of directors. Between 2002 and 2005 the president an co-chief operating officer was Robert G. Britz and between 2006 and 2007 co-chief operating officer was Gerald G. Putnam and finally in 2008 Catherina R.Kinney is responsible for this position. If we look at chief executive officer, we will see two significance person. Once that John A. Thain was Chief executive officer between Jan.2004-Nov 2007. The otherone took over the position and have been going on this position ,Duncan L. Niederauer. NYSE Euronext has large product division. There are lots kinds of cash equites that largest cash equity market in whole world. Also it has futures ,options and bonds. IMPACTS OF COMMODITY MARKETS ON ECONOMIES INVESTORS Impacts on Economies Commodity markets is highly active and central to the global marketplace. Due to its highly competitive nature, the future market has become an important tool to determine commodity future prices and current prices with considering estimated amount of supply and demand. Prices are effected by information flow about commodities such as weather conditions or another conditions which effect the supply and demand from around the world. This kind of information and the way people absorb it constantly changes the price of a commodity. This process is known as price discovery. There is no doubt that commodity exchange is a necessity for developing and still underdeveloped countries which economy based on agriculture, species, metals, crude oil and natural gas. Countries have a chance to market our commodity this markets easily so that Financial and Capital markets will be vitality and fullness than before. Also using commodity markets provide that foreign trade will increase, developme nt of economy pick up speed. Using Commodity Exchange ensures that as follow; Contributes to economy more efficient use and distribution of sources. So provides standardization of commodities. Increases level of development of financial markets. Takes part in advanced markets and provides the integration of these markets. Increases efficiency of market and derivatives markets increase the rate of circulation of money by offering alternative investment opportunities for the money circulating in financial markets so increase liquidity of economy. Provides a realistic prices in international market conditions. Markets spread wide bases and prevented shallowness and easy manipulation affected by price movements. And this way markets operate in stability and confidence. Impacts on Investors Existing and doing business on commodity exchange, together with use of different financial derivatives bring benefits to all participants. Future contracts can be used as a means of protection. It provides protection of future price uncertainity. It largely reduce price risk when making purchases, increases liquidity of market and open a lot of space to increase and secure profit. Purpose of futures is transfer the risk from one party to another and to protect against price fluctuations. Speculation has become an important factor in these market. Consumer use futures to protect themselves against a rise in the price of commodities. On the other hand investors use future to speculate on future price changes. Theoretically the speculator assumes the price risk that the hedger is seeking to minimize. Consumer of commodity gets information about prices from the exchange, After the evaluation of price and commodity to ensure commodity over the stability price so account the costs and selling prices with less risk there is less chance of producers hiking up prices to make up for profit losses in the cash market. If produce more cheaper than foreign competitors, they can export to the world and provide foreign exchange return to the own economy. In the commodity markets it is possible to get a position with less capital. Someone who knows the market but can not get a position because of less capital take a futures and obtain high returns. And should be noted that gain can be less than losses even more than entry of contract price. RECENT TRENDS IN GLOBAL COMMODITY MARKETS In the middle of 20th century commodity markets importance have been noticed by people. Nowadays the investors,issuers and finance specialists realizes that commodity markets should be investigated and considered on it because of high expected returns. Commodity markets are very huge contents. Lots of products are trading in commodity markerts. For example as agriculture and food rice ,coffee, dried food, wheat, fruitsÃÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¦ we can increase the number of product.Industry products are cotton, crude oil or as metals copper, aliminuimÃÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¦ At below we select and mention two important commodities market because of hugeness of commodities markets. AgricultureFood: World market prices of major agriculture and food have increased sharply that more than %60 in last two years. Also retail food prices are increasing all over the world. This increment depends on some circumstances like weather, transportation, demand and supplyÃÆ'  ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¦Some factors reflect underlying trend for supply and demand for agriculture products. Also we can say that increments of agriculture products are related to other commodity products like oil. We listed some supply factors and demand factors that result in increment of agriculture produt prices: Demand factors; increasing population ,rapid economic growth, declining demand for stocks of food commodities, rapid expansion biofuels production, aggressive purchases by importers and importer policies. Supply factors; slowing growth in agriculture products ,ascalating crude oil product, rising farm production cost, adverse weather and exporter policies. Note: Each year small percentage of agriculture land has been converted non-agriculture land. Oil commodities: Oil commodities are first formly traded and most widely energy commodities. Fluctuations in the oil markets are particular political interests. Some commodity market speculation is directl y related to the stability of certain states, e.g. during Persian Gulf War, speculation on the survival of the regime of  Saddam Hussain  in Iraq. Similar political stability concerns have from time to time driven the price of  oil. In oil market political conditions of oil countries is very important for stability and prices of oil. Middle East countries(who has huge amount of world oil) are playing a key role for prices. In oil crisis times prices are rapidly increasing as result of countries politics. Nowadays prices are increasing in all countries but with different amounts. Specialists have made some investigation about resources of oil that they assume that oil resources have life of 40-50 year. The world should find out new resources instead of oil. Accourding to this assumption we can think that when supply of commodity decrase , the price of commodity is increase.

Importance of Generally Accepted Auditing Standards (GAAS)

Accounting Importance of Generally Accepted Auditing Standards (GAAS) Miriam Manjarres November 18, 2012 Abstract The Generally Accepted Auditing Standards are standards that were developed through the American Institute of Certified Public Accountants as a foundation in conducting an audit in its reasonable accuracy. There is a need for auditors to follow the standards provided to be able to render a report of the financial statements audited stating that it is free from any misstatement. GAAS are divided into three categories such as the general standards, the standards of fieldwork and standards of reporting. Auditors can render reports of the financial statements audited in four ways. The report†¦show more content†¦Auditors and GAAS Auditors have an important role in the business world. They are primarily in charge with checking the accuracy of the financial statements reported by business entities. These business entities are required to record,interpret and report every business transaction that has a corresponding effect on the comapany’s economic standing. The whole business process of every business entity or organization are done or made in accordance with the Generally Accepted Accounting Principles.(GAAP) However, there are instances that business entities do not accurately follow the rules and guidelines provided in the GAAP. Some entities are doing it without the intention to defraud others but there are also others who delineate f rom the standards provided with the intention to mislead others into believing that the company is performing well or has enough assets to pay all of its liabilities despite the opposite fact. To prevent the instances mentioned above from happening, auditors are required to obtain and evaluate data from the business entities to check for anyShow MoreRelatedInternational Standards On Auditing Standards1527 Words   |  7 PagesInternational standards on auditing were set to provide guidance for audits conducted all over the world. As globalization becomes more prevalent, it is essential that these standards are set to provide guidance in the conductions of audits internationally. Even though there are international standards, each country can develop their own set of standards and adopt some of the aspects of the international standards on auditing. However, there is no requirement that the standards set in a particularRead MoreAuditing and Assurence Services Chapter 2 Solutions527 5 Words   |  22 PagesCHAPTER 2 Professional Standards LEARNING OBJECTIVES | | | | | | |Exercises, Problems, and | | |Review Checkpoints |Simulations | | Read MoreParmalat Case Answers Essay1225 Words   |  5 Pagesundermining revenue. We also have to consider different accounting and financial reporting treatments for the same transactions and accounts. Auditor’s role is to ensure that proper accounting and financial reporting standards are applied to the client’s financial statement data as we all know standards in U.S are different from those of Europe (Italy to be more specific)†¦GAAP and IFRS respectively. 2) What audit procedures would likely have been the most effective for detecting Parmalat’s fraudulent double-billingRead MoreNorth Face2062 Words   |  9 Pagesadditional non-recognizable revenue to be posted and altered/replaced the original working papers that reported the original material misstatement. (Knapp, Rittenberg, Johnstone, Gramling, 2012) Several generally accepted accounting principles (GAAP) and generally accepted auditing standards (GAAS) were violated (In the Matter of Richard Fiedelman, 2003) resulting in declining stock prices and Security and Exchange Commission (SEC) sanctions. SEC Sanctioned Richard Fiedelman The SEC requiresRead MoreWhat Is The Greatest Challenge An Auditor Faces?1266 Words   |  6 Pagesupon the level of education, experience, and in rare cases the weather on the day the individual was asked for his/her view on troublesome areas of the profession. Certainly, this is not uncommon in comparison with similar or related accounting and auditing career fields, in fact this is a common result amongst all professions. Incidentally, the same group of people had numerous aspects found to be favorable in the field which warranted further research on the subject matter and expanded the demographicRead MoreACC 491 Syllabus1437 Words   |  6 PagesSYLLABUS ACC/491 Contemporary Auditing I Copyright  ©2014 by University of Phoenix. All rights reserved. Course Description This course is the first in a two-part series that deals with auditing a company s financial reports, internal controls, and Electronic Data Processing (EDP) systems. Topics include auditing standards, evidence, audit planning and documentation, materiality and risk, internal control, statistical tools, and the overall audit plan and program. Course Dates Nov 11, 2014 - DecRead MoreThe Soundness Of A Client s Business Model1059 Words   |  5 PagesCase #3: NextCard, Inc. Name: Geon Ui Lee Q1. Should auditors evaluate the soundness of a client’s business model? AU 311 https://pcaobus.org/Standards/Auditing/Pages/AU311.aspx Generally Accepted Auditing Standards (GAAS) do not clearly indicate that auditors should evaluate the soundness of a client’s business model. In addition, auditors do not need to write and submit the document about the soundness of a client’s business model. The role of auditors is not judging the client’s businessRead MoreThe Role Of External Auditing On Promoting Good Corporate Governance Essay1646 Words   |  7 PagesThe purpose of this paper is to highlight the role of external auditing in promoting good corporate governance. The role of auditors has been emphasized after the pass of the Sarbanes-Oxley Act as a response to the accounting scandal of Enron. Even though auditors are hired and paid by the company, their role is not to represent or act in favor of the company, but to watch and investigate the company’s financials to protect the public from any material misstatements that can affect their decisionsRead MoreEssay on History of Auditing312 6 Words   |  13 Pages| | |The History of Auditing | |A detailed overview | | Read MoreAuo 1 Study Guide Essay12292 Words   |  50 PagesAshley Richardson 11/15/2013 Western Governors University AUO1 – Auditing and Information Systems Additional Study Questions/ Study Guide 1. Accounting Information Systems Competency 302.1.1: Nature and Purpose The student understands the nature and purpose of information systems. * What is the difference between transaction processing systems, management information systems, and decision support systems? 2. Transaction processing systems - document financial activities

Medicine Costs in America Pay Done By Canadians

Question: Discuss about theMedicine Costs in America for Pay Done By Canadians. Answer: Introduction: The prescription drugs, the ones which are manufactured by American companies are costing much less in Canada than other U.S. countries. But why is this happening when the cost is high in the county who does all the research? The simple answer is the policy of price control. The same is happening because of a Canadian law which actually authorizes every drug dealer through a review board to order a decrease in price if the price of a drug does exceed the median price in the other European countries which does include the U.S.A. Canadians with lacking scope, for the most part independently employed or unemployed laborers, are frequently not able to profit by ideal medications. Here we are talking about a large chunk paying very less amount than Americans do. But the issue doesnt end here. This law has been in place because the other states in U.S. are far behind in terms of research and development than America which can afford to do a lot of research and develop new prescription drugs. (Kounang, 2015) If I talk about my position on the same issue: Canada not being as affluent as America ultimately has this law to protect the interest of their citizens. Keeping this in mind, there should be this rule present in the country various authorities intervene. Various ways to hold down drug costs. But not because of Price Discrimination- My stand will if there is price discrimination then Canadians should also be charged same like Americans are done. (Slate.com, 2000) But there is an issue in Canada; the companies are ready to sell for lower prices in there and nowhere else only because they are able to sell for more in the United States. Price discrimination is prevailing just because America can do good R D and has money but in Canada, unfortunately they are charging different prices to different buyers for the same medicine. No administration ought to when the aggregate expenses of these mechanical strategies are higher than aggregate twist off that Canadians get from this segment. The primary reason physician endorsed medications are so costly in Canada is a direct result of private back up plans. Just in the United States is a more prominent extent of professionally prescribed medication costs paid for by private safety net providers. This private scope is absolutely wasteful, and the organization charges much higher for private other than the other open arrangements. Price discrimination only works in the drug industry because of the expensive nature of R D and the cheap nature of manufacturing. For whatever length of time those organizations can recover their innovative work costs by charging high costs in the United States. And moreover they are even making a benefit in Canada and somewhere else by only taking care of the expense of making the pill or just anything in name of drugs. (Gangon, 2011) In late months, individuals from Congress from both sides have acquainted bills with stop this medication value segregation, either by changing law or same prices should be charged everywhere. It would need to take care of RD costs, as it would be higher than the present cost in Canadian countires. Be that as it may, those expenses would be spread over more pills, so it ought to be lower than the present American cost. The commitment to RD costs, and more costs of drugs will have to be managed by Canada but this will only develop the nation. There can be a rebut that if Canada is not affluent and capable enough to do R D, how can they work in this direction. My counter will be as follows: Doubtlessly the pharmaceutical part is in charge of around 50,000 occupations (immediate and backhanded) in Canada and that every employment is paid a normal of $80,000 a year.. The issue is that these strategies are unreasonable and unjust. As the pharma industry is found completely in Ontario etc.., it looks bad for instance that Americans should be the only ones to pay high costs. Why cant US as a whole do R D and develop medicines. This will not only have employment opportunities but also make sure that country is prospering as a whole. References Kounang, N. 2015, why pharmaceuticals are cheaper abroad, CNN, https://edition.cnn.com/2015/09/28/health/us-pays-more-for-drugs/, Accessed on 17th August, 2016 Gangon, A, 2011, Why Our Prescription Drugs Are Too Expensive and What We Can Do About It https://www.huffingtonpost.ca/marcandre-gagnon/prescription-drug-costs_b_877024.html, Accessed on 17th August, 2016 Slate.com, 2000, Why Do Drugs Cost Less in Canada? https://www.slate.com/articles/news_and_politics/explainer/2000/05/why_do_drugs_cost_less_in_canada.html, Accessed on 17th August, 2016