Commodities

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In economics, a commodity is the generic term for any marketable item produced to satisfy wants or needs. Economic commodities comprise goods and services.

The more specific meaning of the term commodity is applied to goods only. It is used to describe a class of goods for which there is demand, but which is supplied without qualitative differentiation across a market. A commodity has full or partial fungibility; that is, the market treats it as equivalent or nearly so no matter who produces it. Copper and platinum are examples of such commodites. The price of copper is universal, its price is determined as a function of its market as a whole and fluctuates based on global supply and demand. Items such as stereo systems, on the other hand, have many aspects of product differentiation, including the brand, user interface, and perceived quality, which affect the price.

Well established physical commodities have actively traded spot and derivative markets. Generally, these are basic resources and agricultural products. Hard commodities are goods that are extracted through mining, such as aluminium, copper, gold, iron ore, palladium, platinum, salt, and silver. Soft commodities are goods that are grown, such as coffee beans, rice, soybeans, sugar, and wheat. Energy commodities include coal, gas, oil and electricity. Electricity is expensive to store, hence, electricity is usually consumed as soon as it is produced.

Attribution

This is based on the Wikipedia Commodity article.

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