Which of the following best defines the term commodity?
A) A physical object we find, grow, or make to meet out needs and those of others.
B) An activity that benefits people, such as health care, education, and entertainment.
C) An economic system which adheres to the principles of socialism.
D) A benefit given to those who participate in the capitalist market.
Commodities are basic goods that are interchangeable with other goods of the same kind. A commodity is usually used as an input in the production of another good or service. Although there may be slight differences in quality among commodity producers, it remains essentially the same. Commodities that are traded on exchanges must also meet a minimum standard known as a basis grade. A commodity produced by one producer differs little from a commodity produced by another producer. Oil produced by various producers is basically the same product.
As opposed to this, for electronics merchandise the quality and features can vary greatly from one manufacturer to another. Commodities such as grains, gold, beef, oil, and natural gas are traditional examples. Currently, financial products such as foreign currencies and indices are included in the definition. Additionally, technological advancements have led to the creation of new types of commodities. Examples would be cell phone minutes and bandwidth.