Final answer:
The factor based on the concept that older adults have reduced capacity and loss of functioning, requiring a reduction in performance in most life domains is compensation.
Step-by-step explanation:
The factor that is based on the concept that older adults have a reduced capacity and loss of functioning, which require a reduction in performance in most life domains is compensation. According to the selective optimization with compensation theory, as we age, our energy diminishes, and we have to select personal goals to optimize our efforts and compensate for the loss of functioning. This theory suggests that successful aging involves adjusting our performance in different life domains to accommodate our reduced capacity.