Transaction Costs Are An Obstacle To Trade

ryanEconomics(ML), Mini Lessons

From Common Sense Economics: What Everyone Should Know about Wealth and Prosperity eBook:

Voluntary exchange promotes cooperation and helps us get more of what we want. However, trade itself is costly. It takes time, effort, and other resources to search out potential trading partners, negotiate trades, and close the sale. Resources spent this way are called transaction costs, and they are an obstacle to the creation of wealth.

  1. The internet is doing an incredible job lowering transaction costs. Think of some examples of things that would have been really hard for you to get or do, without the internet. How have they lowered your transaction costs?
  2. Reflecting on the video, why do we have pawn shops? Why don’t sellers simply sell directly to buyers?

This reading is an excerpt from Certell’s Common Sense Economics eBook.  Certell offers curriculum materials and eBooks free of charge for students and teachers.  Click Here to download the Common Sense Economics Materials.

Image Citation:

23, Oct. 2018 Artist drawing of a Middle Man [Digital image].  Retrieved from <>.