Definition of Commodity

Definition of Commodity

Commodity  is a primary good used in business that is exchangeable with other products of the same type; products are most often used as information in the production of other services or goods.


Brief Explanation of Commodity

When they are exchanged on an exchange, products must also meet specified minimum requirements, also known as a basic quality. The standard of it may vary a little bit, but it is actually consistent across manufacturers.

The concept is that there is little difference between a commodity coming from one manufacturer and the same from another manufacturer. A gun barrel of oil is basically the same product, regardless of manufacturer. In comparison, for electronic devices products, the top quality and features of a given product may be completely different based on manufacturer. Some traditional illustrations of products consist of grain, gold, meat, oil and natural gas. More recently, this is has extended to consist of financial loans, such as foreign currency and indices. Technical developments have also led to new types of products being interchanged in the marketplace. For example, mobile phone minutes and data transfer usage.


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