Transaction costs refer to the expenses incurred when buying or selling goods and services. These costs can include fees for services, time spent negotiating, and expenses related to enforcing contracts. They can affect the overall efficiency of markets and influence decisions made by individuals and businesses. These costs can be categorized into three main types: search and information costs, bargaining and decision costs, and policing and enforcement costs. Understanding transaction costs is essential for economists and businesses, as they can impact pricing, market structure, and the overall economy, influencing how resources are allocated in the market.