Fungible Goods: Definition, Example and Related Terms
What are Fungible Goods ?
Fungible goods are items that are identical to each other and can be replaced or exchanged with another item of the same kind. In other words, these are goods that are not unique in their details and can be easily replaced with another identical item.
For example, a pound of sugar is a fungible good because it is the same no matter where you buy it or who you buy it from. Each unit of sugar is exactly the same as every other unit, so it doesn't matter which specific unit you have. If you lend a pound of sugar to your neighbor, it doesn't matter if they don't return that exact same sugar - any pound of sugar will do because sugar is fungible.
The most common examples of Fungible Goods are... Currency, Precious Metals, Grains, Oil, Natural Gas, Chemicals, Sugar, Coal, Cotton, Soybeans, Government Bonds, Stocks, Corporate Bonds, Electricity, Water, Steel, Coffee Beans and Aluminium.
Example(s)
Scenario Description In the oil industry, barrels of crude oil are often traded between companies. Crude oil is a fungible good because one barrel of crude oil is identical to another. Even if the oil comes from different parts of the world, it doesn't matter - as long as it meets certain basic requirements, one barrel of crude oil can be exchanged for another. In the grain market, bushels of wheat are commonly bought and sold. Wheat is a fungible good because one bushel of wheat is just like another. It doesn't matter where the wheat was grown or who grew it - as long as it is the same type of wheat, one bushel can be replaced with another.