AskDefine | Define commodity

Dictionary Definition

commodity n : articles of commerce [syn: trade goods, goods]

User Contributed Dictionary

English

Etymology

commoditee < commoditee, from commoditat, commoditas.

Alternative spellings

Noun

  1. Anything movable (a good) that is bought and sold.
  2. Something useful or valuable.
    ''And Slade said: "It really makes me sad that football club chairmen and boards seem to have lost that most precious commodity - patience. "Sam's sacking at Newcastle had, I suppose, been on the cards for a while, but it is really ridiculous to fire a manager after such a short time. Somerset County Gazette on Jan. 14th, 2008.
  3. In the context of "economics": Raw materials, agricultural products and other primary products as objects of large scale trading in specialized exchanges.
    The price of crude oil is determined in continuous trading between professional players in World's many commodities exchanges.
  4. In the context of "marketing": Undifferentiated goods characterized by a low profit margin, as distinguished from branded products.
    Although they were once in the forefront of consumer electronics, the calculators have become a mere commodity.''

Translations

anything movable traded
  • Finnish: hyödyke
  • French: produit, bien
  • Polish: towar
  • Spanish: bien
something useful
  • Finnish: avu, hyödyke
primary product as object of trade
  • Finnish: raaka-aine, hyödyke
undifferentiated good
  • Finnish: massahyödyke

Extensive Definition

A commodity is anything for which there is supply, but which is demanded without qualitative differentiation across a foreign market.
Characteristic of commodities is that their prices are determined as a function of their market as a whole. Well-established physical commodities have actively traded spot and derivative markets. Generally, these are basic resources and agricultural products such as iron ore, crude oil, coal, ethanol, sugar, coffee beans, soybeans, aluminum, rice, wheat, gold and silver.
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 have become commodities, such as generic pharmaceuticals and silicon chips. Linguistically, the word commodity came into use in English in the 15th century, derived from the French word "commodité", similar in meaning to "convenience" in terms of quality of services. The Latin root meaning is commoditas, referring variously to the appropriate measure of something; a fitting state, time or condition; a good quality; efficaciousness or propriety; and advantage, or benefit. The German equivalent is die Ware, i.e. wares or goods offered for sale. The French equivalent is "produit de base" or "matière première" like energy, goods, or industrial raw materials.
A commodity's value changes over time.

Commodity trade

In the original and simplified sense, commodities were things of value, of uniform quality, that were produced in large quantities by many different producers; the items from each different producer are considered equivalent. It is the contract and this underlying standard that define the commodity, not any quality inherent in the product.
Markets for trading commodities can be very efficient, particularly if the division into pools matches demand segments. These markets will quickly respond to changes in supply and demand to find an equilibrium price and quantity. In addition, investors can gain passive exposure to the commodity markets through a commodity price index.

See also

commodity in Breton: Marc'hadourezh
commodity in German: Handelsware
commodity in Spanish: Commodities
commodity in French: matière première
commodity in Indonesian: Komoditi
commodity in Italian: Commodity
commodity in Dutch: Commodities
commodity in Portuguese: Commodity
commodity in Swedish: Handelsvara
commodity in Yiddish: קאמאדיטי
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