Raw Materials


DEFINITION of 'Raw Materials'

A material or substance used in the primary production or manufacturing of a good. Raw materials are often natural resources such as oil, iron and wood. Before being used in the manufacturing process raw materials often are altered to be used in different processes. Raw materials are often referred to as commodities, which are bought and sold on commodities exchanges around the world.


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BREAKING DOWN 'Raw Materials'

Raw materials are sold in what is called the factor market. This is because raw materials are factors of production along with labor and capital. Raw materials are so important to the production process that the success of a country's economy can be determined by the amount of natural resources the country has within its own borders. A country that has abundant natural resources does not need to import as many raw materials, and has an opportunity to export the materials to other countries.

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