Commodity

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

The word commodity came into use in English in the 15^th century, from the French commodity, to a benefit or profit. The French word derived from Latin and means “fitness, adaptation”. 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 demand is, but which is supplied without qualified differentiation across a market. A commodity has full or partial fungibility; that is, the market treats its instances as equivalent or nearly so with no regard to who produced them. “From the taste of wheat it is not possible to tell who produced it, a Russian serf, a French peasant or an English capitalist”. Petroleum and copper are other examples of such commodities, their supply and demand being a part of one universal market. Items such as stereo systems, on the other hand, have many aspects of product differentiations, such as the brand, the user interface, the perceived quality, etc. And, the demand for one type of stereo may be much larger than demand on the other.

In contrast, one the characteristics of a commodity good are that its price is determined as a function of its market as a whole. Well-established physical commodities have actively traded spot and derivative markets. Generally, there are basic resources and agricultural products such as iron ore, crude oil, coal, salt, sugar, coffee beans, soybeans, aluminum, copper, rice, wheat, gold, silver, palladium, and platinum. Soft commodities are goods that are grown, while hard commodities are the ones that are extracted through mining.

There is another important class of energy commodities which includes electricity, gas, coal and oil. Electricity has the particular characteristic that it is usually uneconomical to store; hence, electricity must be consumed as soon as it is produced. Commoditization (also called commoditization) occurs as a goods or services market loses differentiation across its supply base, often by the diffusion of the intellectual capital necessary to acquire or produce it efficiently. As such, goods that formerly carried premium margins for market participants save become commodities, such as generic pharmaceuticals and DRAM chips. Another example is the credit card product, where all suppliers offer almost identical interest rates, fees, rewards programs, and bait & hook incentive models for new customers. Since the core credit card product is essentially identical, the only remaining market differentiators are branding & customer service.

Дата добавления: 2015-08-17