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Concept
Commodity
Summary
In economics, a commodity is an economic good, usually a resource, that has full or substantial fungibility: that is, the market treats instances of the good as equivalent or nearly so with no regard to who produced them.
The price of a commodity good is typically determined as a function of its market as a whole: well-established physical commodities have actively traded spot and derivative markets. The wide availability of commodities typically leads to smaller profit margins and diminishes the importance of factors (such as brand name) other than price.
Most commodities are raw materials, basic resources, agricultural, or mining products, such as iron ore, sugar, or grains like rice and wheat. Commodities can also be mass-produced unspecialized products such as chemicals and computer memory. Popular commodities include crude oil, corn, and gold.
Other definitions of commodity include something useful or valued and an alternative term for an economic good or service available for purchase in the market. In such standard works as Alfred Marshall's Principles of Economics (1920) and Léon Walras's Elements of Pure Economics ([1926] 1954) 'commodity' serves as general term for an economic good or service.
The word commodity came into use in English in the 15th century, from the French commodité, "amenity, convenience". Going further back, the French word derives from the Latin commoditas, meaning "suitability, convenience, advantage". The Latin word commodus (from which English gets other words including commodious and accommodate) meant variously "appropriate", "proper measure, time, or condition", and "advantage, benefit".
In economics, the term commodity is used specifically for economic goods that have full or partial but substantial fungibility; that is, the market treats their instances as equivalent or nearly so with no regard to who produced them. Karl Marx described this property as follows: "From the taste of wheat, it is not possible to tell who produced it, a Russian serf, a French peasant or an English capitalist.
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