Every exchange incurs some kind of transaction cost. Consider electronic share trading, which has sharply lowered the cost of buying and selling shares, both in terms of commissions and the spread between the bid and offer.

But money may not be the only consideration. Time is also a component in a transaction. The large range of products under one roof in a supermarket is a convenience for many people as it reduces the time transaction costs associated with buying groceries and household essentials.

On a macro level, transaction costs can play an even bigger role: The time to set up a business corporation; to prepare and file taxes; the costs in resolving business contract disputes etc.

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