when transaction costs diminish an economy becomes more efficient and more capital and labor are freed to produce wealth a shift of this nature does not come without growing pains as the labor market must adjust to its new environment 
one type of transaction cost is a barrier to communication when an otherwise perfectly matched seller and buyer have absolutely zero means of communication the transaction costs of a deal are too high to be overcome a bank serves the role of the middleman by connecting savings with investments and a prosperous economy justifies the income of the bank for the transaction cost of compiling information and linking parties however new technologies have greatly reduced barriers to communication consumers no longer need large institutions and their agents to make educated purchases many industries based on facilitating these types of transactions are changing rapidly for example insurance agents are being replaced by a wide range of technology startups that run websites either selling or promoting insurance policies the easy access to information and communication that the internet provides has created fundamental shifts in many jobs such as the real estate agent stockbroker and car salesman transaction costs can change because of shifting industry norms but in some cases they are impacted by government or judicial action for example a 2024 settlement in a lawsuit against the national association of realtors nar proposed eliminating the standard 6 commission rate that was split between buyer s and seller s agents if the new rules from the settlement are formally adopted both buyers and sellers will have the option to negotiate commissions separately with their agents brokers which could create lower transaction costs in real estate purchases how compensation offers are made would also change 1with the reduction in transaction costs the effective prices of many goods and services have gone down due to a reduction in barriers to communication between everyday individuals this is seen in the consumer goods industry as well traditionally retailers and merchandisers served the role of middlemen by pairing consumers with manufacturers with the rise of e commerce transactions and direct to consumer companies however many consumer goods are available without the transaction cost of a retail markup which lowers the cost of those goods as well however this can result in other costs that consumers don t pay at brick and mortar retailers such as shipping fees for online purchases if you re not quite sure where to start when evaluating your transaction fees consider guidance from the sec regarding the best questions to ask 2example of transaction costsmutual funds are a common example of a service that comes with associated transaction costs this is often found in the form of a load fee which pays the brokers as an incentive for choosing one mutual fund over another according to fidelity the load for mutual funds ranges from 1 to 2 fidelity also notes that financial advisors may receive payment via commission or an annual percentage of your entire portfolio the annual percentage often ranges between 0 5 and 2 0 3another cost that investors must pay for a mutual fund is called a 12b 1 fee this fee may range from 0 25 to 1 depending on whether the fee is front loaded or back loaded 3 as opposed to many other types of mutual fund fees this fee is usually a one time transaction though it s often disclosed as a marketing fee the 12b 1 fee is often paid to the broker who sold you the fund 