In the field of
economics
Economics () is a behavioral science that studies the Production (economics), production, distribution (economics), distribution, and Consumption (economics), consumption of goods and services.
Economics focuses on the behaviour and interac ...
, the
commodity
In economics, a commodity is an economic goods, good, usually a resource, that specifically has full or substantial fungibility: that is, the Market (economics), market treats instances of the good as equivalent or nearly so with no regard to w ...
value of a
good
In most contexts, the concept of good denotes the conduct that should be preferred when posed with a choice between possible actions. Good is generally considered to be the opposite of evil. The specific meaning and etymology of the term and its ...
is its
free market
In economics, a free market is an economic market (economics), system in which the prices of goods and services are determined by supply and demand expressed by sellers and buyers. Such markets, as modeled, operate without the intervention of ...
value under optimal use conditions. In a free market, the commodity value of a good will be reflected by its price.
Example
If an acre of land can yield a net of 100 dollars loss by lying
fallow
Fallow is a farming technique in which arable land is left without sowing for one or more vegetative cycles. The goal of fallowing is to allow the land to recover and store Organic compound, organic matter while retaining moisture and disrupting ...
, 50 dollars gain by being planted with corn, and 100 dollars gain by being planted with wheat, then that acre's commodity value is 100 dollars; the farmer is assumed to put his land to best use. The price of a commodity fluctuates around its commodity value.
Currency
A commodity value expressed as a
price
A price is the (usually not negative) quantity of payment or compensation expected, required, or given by one party to another in return for goods or services. In some situations, especially when the product is a service rather than a ph ...
is determined by historical, social and cultural aspects of production and distribution.
Karl Marx
Karl Marx (; 5 May 1818 – 14 March 1883) was a German philosopher, political theorist, economist, journalist, and revolutionary socialist. He is best-known for the 1848 pamphlet '' The Communist Manifesto'' (written with Friedrich Engels) ...
described price as the money-name for the
labour realised in a commodity.
A commodity value is dependent on its
utility
In economics, utility is a measure of a certain person's satisfaction from a certain state of the world. Over time, the term has been used with at least two meanings.
* In a normative context, utility refers to a goal or objective that we wish ...
.
Because money becomes valuable not due to its substance, that is, its commodity value, but rather because of its performance, currencies tend to become
token
Token may refer to:
Arts, entertainment, and media
* Token, a game piece or counter, used in some games
* The Tokens, a vocal music group
* Tolkien Black, a recurring character on the animated television series ''South Park,'' formerly known as ...
.
See also
*
Commodity market
A commodity market is a market that trades in the primary economic sector rather than manufactured products. The primary sector includes agricultural products, energy products, and metals. Soft commodities may be perishable and harvested, w ...
*
Gold as an investment
Of all the precious metals, gold is the most popular as an investment. Investors generally buy gold as a way of diversifying risk, especially through the use of futures contracts and derivatives. The gold market is subject to speculation and ...
References
Commodities used as an investment
Business terms
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