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What Is a Commodity?

In economics, an economic service or good having complete or substantial fungibility is called a commodity. It regards the good’s market treats instances as equivalent or almost regardless of their producer.

What’s more? Commodities are inclusive of agricultural products, metals as well as fuels. Additionally, their trades take place in bulk on a spot market or commodity exchange.

Aside from that, commodities are also capable of mass-producing unspecialized products, for instance, computer memory and chemicals.

As per common belief, the same type of commodities is interchangeable for as long as they have the same grade.

 

Karl Marx’s Description About Commodity:     

 

As per the description of a German economist Karl Marx, it is impossible to tell who produced wheat from its taste. It can be a French peasant, a Russian serf, or an English capitalist.

What About Its Etymology?         

In the 15th century, the use of the word ‘commodity’ began in the English language, from the French commodité, “convenience, and amenity.”

Types Of Commodity:

Commodities are of the following three types:

·        Hard Commodity:

it is inclusive of mined goods, for instance, silver, oil, helium, gold, etc.   

·        Soft Commodity:            

It includes agricultural goods such as rice and wheat.

·        Energy Commodity:       

It encompasses gas, oil, electricity, and coal.

 

 

How Are Commodities Traded?

 

The trade of most commodities takes place on their own exchanges. This includes the:

  • New York Mercantile Exchange (NYMEX)
  • Chicago Board of Options Exchange (CBOE)
  • Chicago Mercantile Exchange
  • Chicago Board of Trade (CBOT)
  • Kansas City Board of Trade
  • Minneapolis Grain Exchange