They are often raw materials or primary agricultural products that can be bought and sold, typically traded on exchanges where prices are determined by supply and demand. Commodities can be categorized into two main types: hard commodities, which are natural resources like oil and metals, and soft commodities, which are agricultural products like wheat and coffee. The trading of commodities can impact various sectors of the economy and can serve as a hedge against inflation.
Commodities Example
For example, when the price of crude oil rises, it can affect the cost of gasoline, leading to higher transportation costs for goods and services, which can then drive up prices across the economy.