Fungibility is the property of a good In macroeconomics and accounting, a good is contrasted with a service. In this sense, a good is defined as a physical product, capable of being delivered to a purchaser and involves the transfer of ownership from seller to customer, say an apple, as opposed to an (intangible) service, say a haircut. A more general term that preserves the or a commodity A commodity is a good for which there is demand, but which is supplied without qualitative differentiation across a market. Commodities are substances that come out of the earth and maintain roughly a universal price.It is fungible, i.e. equivalent no matter who produces it. Examples are petroleum, notebook paper, milk or copper. The price of whose individual units are capable of mutual substitution. Examples of highly fungible commodities are crude oil Petroleum or crude oil is a naturally occurring, flammable liquid consisting of a complex mixture of hydrocarbons of various molecular weights, and other organic compounds, that are found in geologic formations beneath the earth's surface, wheat Wheat is a grass, originally from the Fertile Crescent region of the Near East, but now cultivated worldwide. In 2007 world production of wheat was 607 million tons, making it the third most-produced cereal after maize (784 million tons) and rice (651 million tons). Globally, wheat is the leading source of vegetable protein in human food, having a, orange juice Orange juice is a popular beverage made from oranges by extraction from the fresh fruit, by desiccation and subsequent reconstitution of the dried juice, or by concentration and subsequent addition of water to the concentrate. The term "orange juice" is also used, both colloquially and commercially, to refer to "concentrated orange, precious metals A precious metal is a rare, naturally occurring metallic chemical element of high economic value, which is not radioactive . Chemically, the precious metals are less reactive than most elements, have high lustre, are softer or more ductile, and have higher melting points than other metals. Historically, precious metals were important as currency,, and currencies In economics, the term currency can refer to a particular currency, for example Pound Sterling, or to the coins and banknotes of a particular currency, which comprise the physical aspects of a nation's money supply. The other part of a nation's money supply consists of money deposited in banks , ownership of which can be transferred by means of.
It refers only to the equivalence of each unit of a commodity with other units of the same commodity. Fungibility has nothing to do with the ability to exchange one commodity for another different commodity. It refers only to the ease of exchanging one unit of a commodity with another unit of the same commodity.
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Etymology
The word comes from Latin fungibilis from fungi, meaning "to perform", related to "function" and "defunct".
Fungibility versus liquidity
Fungibility is different from liquidity In business, economics or investment, market liquidity is an asset's ability to be sold without causing a significant movement in the price and with minimum loss of value. Money, or cash on hand, is the most liquid asset. An act of exchange of a less liquid asset with a more liquid asset is called liquidation. Liquidity also refers both to a. A good is liquid if it can be easily exchanged for money Money is any object that is generally accepted as payment for goods and services and repayment of debts in a given country or socio-economic context. The main functions of money are distinguished as: a medium of exchange; a unit of account; a store of value; and, occasionally, a standard of deferred payment or another different good. A good is fungible if one unit of the good is substantially equivalent to another unit of the same good of the same quality at the same time and place.
Examples:
- Cash is fungible: one US$ The United States dollar is the official currency of the United States. The U.S. dollar is normally abbreviated as the dollar sign, $, or as USD or US$ to distinguish it from other dollar-denominated currencies and from others that use the $ symbol. It is divided into 100 cents10 bank note is interchangeable with another.
- Crude oil is fungible: a barrel of West Texas Intermediate West Texas Intermediate , also known as Texas Light Sweet, is a type of crude oil used as a benchmark in oil pricing and the underlying commodity of New York Mercantile Exchange's oil futures contracts crude oil Petroleum or crude oil is a naturally occurring, flammable liquid consisting of a complex mixture of hydrocarbons of various molecular weights, and other organic compounds, that are found in geologic formations beneath the earth's surface is fungible (direct exchange) with another barrel of the same type and grade of crude oil.
- Different issues of a government bond (maybe issued at different times) are fungible with one another if they carry precisely the same rights and any of them is equally acceptable in settlement of a trade.
- Diamonds In mineralogy, diamond is an allotrope of carbon, where the carbon atoms are arranged in a variation of the face-centered cubic crystal structure called a diamond lattice. Diamond is less stable than graphite, but the conversion rate from diamond to graphite is negligible at ambient conditions. Diamond is renowned as a material with superlative are not fungible because diamonds' varying cuts, colors, and sizes make it difficult to judge the value of one diamond against the value of another.
Fungibility does not imply liquidity, and liquidity does not imply fungibility. Diamonds can be readily bought and sold (the trade is liquid) but individual diamonds, being unique, are not interchangeable (diamonds are not fungible). Indian rupee The Indian rupee (sign: ; code: INR) is the official currency of India. The issuance of the currency is controlled by the Reserve Bank of India bank notes A banknote is a kind of negotiable instrument, a promissory note made by a bank payable to the bearer on demand, used as money, and in many jurisdictions is legal tender. Along with coins, banknotes make up the cash or bearer forms of all modern fiat money. With the exception of non-circulating high-value or precious metal commemorative issues, are mutually interchangeable in London (they are fungible there) but they are not easily traded there (they cannot be spent in London). In contrast to diamonds, gold coins of the same grade and weight are fungible, as well as liquid In business, economics or investment, market liquidity is an asset's ability to be sold without causing a significant movement in the price and with minimum loss of value. Money, or cash on hand, is the most liquid asset. An act of exchange of a less liquid asset with a more liquid asset is called liquidation. Liquidity also refers both to a.
Fungibility in law
In legal disputes, when one party is compelled to remedy another party as the result of a ruling or adjudication, the appropriate legal remedy A legal remedy is the means with which a court of law, usually in the exercise of civil law jurisdiction, enforces a right, imposes a penalty, or makes some other court order to impose its will may depend on the fungibility of the underlying right, obligation or property interest that is intended to be restored.[1] Depending on whether the interests of the aggrieved party are fungible (a determination made by the trier of fact) the appropriate remedy may change. For example, a court may require specific performance In the law of Remedy, an order of specific performance is an order of the court which requires a party to perform a specific act, usually what is stated in a contract. It is commonly used in the form of injunctive relief concerning confidential information or real property. While specific performance can be in the form of any type of forced action, as a remedy for breach of contract, instead of the more favored remedy of monetary damages Monetary damages, in civil law, refers to compensation given to an injured party by a liable party. Monetary damages may be restitution, a penalty, or both.[2]
References
- ^ S. Williston, The Law of Contracts § 1338 (1920); Farnsworth, Legal Remedies for Breach of Contract, 70 Colum. L. Rev. 1145, 1147 (1970)
- ^ Bunge Corp. v. Recker, U.S. Ct. of App., 8th Cir., 1975; Restatement (Second) of Contracts Ch 16. introductory note (1981)
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