# Define Commodity #economic_reasoning/austrian_method --- # Link --- # References The Free Market Center Journal:[Define Commodity](https://freemarketcenterjournal.com/2023/04/26/define-commodity/) Language & Logic:[Define Commodity](https://clearthinking.substack.com/p/define-commodity) # Define Commodity Summary::A commodity consists of a product (or *economic good*) that a producer or middleman holds in readiness for sale. The word "commodity" has a somewhat different meaning in economics than in common usage. Most people consider commodities interchangeable products sold in relatively large quantities - frequently raw materials. We use a more precise definition incorporating two related terms: goods and economic goods. ## Goods Goods consist of any materials or resources that satisfy human desires. The quantity available does not affect whether or not the items qualify as goods. ## Economic Good The available quantity does, on the other hand, distinguish an *economic good* from just a *good*. An economic good consists of a good available in limited quantity. Availability (or whether a good is an economic good or not) depends on the situation. In the middle of a lake, we consider water as just a good, not an economic good. In a desert, water would become an economic good. This distinction explains the apparent paradox of diamonds demanding a higher market price than water. It also hints at why rock stars command more money than school teachers. (I will discuss this topic more later.) ## Commodity Understanding the meaning of economic goods clarifies the meaning of commodities. A commodity consists of a product (or *economic good*) that a producer or middleman holds in readiness for sale. # Conclusion When I use the term commodity on this site, you will know what I mean.