In general, commodities are raw materials that are transformed into finished products. Oil, animals, and metals are interchangeable with other similar goods. A barrel of wheat that complies with industry standards will be identical to any other barrel of wheat that complies with the same standard, regardless of its origin. However, two distinct bread companies may make substantially different goods even if they source their wheat from the same grower.

Commodities and products are distinct economic entities with key differences. Commodities refer to raw materials or primary goods that are uniform in quality and are traded on exchanges. Examples include agricultural goods like wheat, metals like gold, and energy sources like oil. Commodities often lack differentiation between individual units, and their value is largely determined by market forces.

On the other hand, products encompass a broader category, referring to goods or services resulting from a manufacturing or production process. Products can range from simple consumer goods to complex machinery or intangible services. Unlike commodities, products often have varying qualities, brand differentiations, and pricing based on factors such as branding, features, and marketing strategies. While commodities are standardized and traded on exchanges, products cater to diverse consumer needs and preferences in a competitive market.