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.