A commodity is a marketable item produced to satisfy wants or needs.

1. Economic commodities comprise goods and services.
2. The exact definition of the term commodity is specifically applied to goods . It is used to describe a class of goods for which there is demand, but which is supplied without qualitative differentiation across a market
3. A commodity has full or partial fungibility; that is, the market treats its instances as equivalent or nearly so with no regard to who produced them. "From the taste of wheat it is not possible to tell who produced it, a Russian serf, a French peasant or an English capitalist.
4. Petroleum and copper are other examples of such commodities
5. Their supply and demand being a part of one universal market. Items such as stereo systems, on the other hand, have many aspects of product differentiation, such as the brand, the user interface and the perceived quality. The demand for one type of stereo may be much larger than demand for another.

In contrast, 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, salt, sugar, tea, coffee beans, soybeans, aluminum, copper, rice, wheat, gold, silver, palladium, and platinum. Soft commodities are goods that are grown, while hard commodities are the ones that are extracted through mining.

There is another important class of energy commodities which includes electricity, gas, coal and oil. Electricity has the particular characteristic that it is usually uneconomical to store; hence, electricity must be consumed as soon as it is produced.

Commodification (also called 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 DRAM chips.

Another example suggested by the New York Times is multivitamin supplements; a 50 mg tablet of calcium is of equal value to a consumer no matter what company produces and markets it, and as such, multivitamins are now sold in bulk and are available at any supermarket with little differentiation among brands. Following this trend, nanomaterials are emerging from carrying premium profit margins for market participants to a status of commodification.