commodity

Definition of commodity

Alternative spellings

• commoditie (archaic)

Etymology

Middle English commoditee < Anglo-Norman commoditee, from Latin commoditat, commoditas.

Pronunciation

• IPA: /kəˈmɑːdəti/, SAMPA: /k@"mA:d@ti/

Noun

commodity (plural commodities)

1. Anything movable (a good) that is bought and sold.
   
   * 1995, James G. Carrier, Gifts and Commodities: Exchange and Western Capitalism Since 1700, p.1221
   If a key part of shopping is the conversion of anonymous commodities into possessions, shopping is a cultural as much as an economic activity.
   
   * 2001, Rachel Pain, Introducing Social Geographies, p. 26 2
   In human geography "commodities" usually refers to goods and services which are bought and sold. The simplest commodities are those produced by the production system just before they are sold.
   
   * 2005, William Leiss, Botterill, Jacki, Social Communication in Advertising: Consumption in the Mediated Marketplace, p.307 3
   Referring to the work of Bourdieu, Zukin (2004,38) notes that shopping is much more than the purchase of commodities
   
   
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.
4. (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.
   
   
5. (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.

Further reading

A commodity is some good for which there is demand, but which is supplied without qualitative differentiation across a market. It is a product that is the same no matter who produces it, such as petroleum, notebook paper, or milk.[1] In other words, copper is copper. The price of copper is universal, and fluctuates daily based on global supply and demand. Stereo systems, on the other hand, have many levels of quality. And, the better a stereo is [perceived to be], the more it will cost.

One of the characteristics of a commodity good is 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, these are basic resources and agricultural products such as iron ore, crude oil, coal, ethanol, salt, sugar, coffee beans, soybeans, aluminum, copper, rice, wheat, gold, silver and platinum. Soft commodities are goods that are grown, while hard commodities are the ones that are extracted through mining.

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.

Notes

1. Sullivan, arthur; Steven M. Sheffrin (2003). Economics: Principles in action. Upper Saddle River, New Jersey 07458: Pearson Prentice Hall. pp. 152. ISBN 0-13-063085-3.