Question

What would be transaction costs be for a grocery store to get their products to the...

What would be transaction costs be for a grocery store to get their products to the store? What would the social costs be for the same store?   Hint: Transaction costs and NOT transportation costs. Give examples to support your answer.

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Answer #1

Transaction costs are the money, time and effort lost in obtaining what a consumer wants. The transaction costs for a grocery store to get their products to the store may include legal fees; communication charges; informational cost of finding the price, durability, and quality; quality inspection cost; basket carrying costs, and inconvenience costs. Social cost may include food loss and waste; costs related to personal injury while driving etc.

For example: In your supermarket, the cost of searching for customer's desired product would be the transaction cost. Searching for it is expensive, however does not provide the consumer with any extra product/service/utility, thus this cost is purely about obtaining another good and an additional cost to the price of the good and nothing more

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