Question

What is the basis for the principle of substitution?(a) An informed buyer will pay no more for a property than the cost of acquiring another equally desirable property with the same or equal utility.(b) Properties will typically hold their value when properties in a neighborhood tend to be similar and conform to common standards.(c) Although a property may have multiple potential uses, one will be the highest and best use.d) Smaller properties in a neighborhood of large properties will tend to increase in value, while larger properties in an area of smaller properties will tend to decrease in value over time.

Answer 1

The correct answer is a) An informed buyer will pay no more for a property than the cost of acquiring another equally desirable property with the same or equal utility.

Step-by-step explanation:

The principle of substitution is a principle in economy that explains a customer or buyer would choose a substitute (product or good with similar or same qualities) to another product if the price of the product increases or there are other products or goods available with a lower price and as long as the customer's economic conditions have not changed.

This means the customer chooses the cheapest option between products available in the market or substitutes a product with others if the new product (substitutes) can be used in the same way than other product. This implies the basis for substitution is that a customer does not pay more for a product if he can get the same or similar product at a lower cost or that "an informed buyer will pay no more for a property than the cost of acquiring another equally desirable property with the same or equal utility".