Real Estate Council of Alberta Fundamentals Practice Exam

What principle dictates that market value is influenced by the available properties and buyers’ interests?

1. Principal of Competition

2. Principal of Supply and Demand

3. Principal of Consistent Use

4. Principal of Substitution

The correct answer is: Principal of Supply and Demand

The principle that dictates that market value is influenced by the available properties and buyers' interests is the principle of supply and demand. This principle holds that the value of a property is determined by how much of a property is available in the market (supply) versus how much interest there is from buyers (demand). When there is a high demand for properties and limited supply, prices tend to increase. Conversely, if there is an abundance of properties available but fewer buyers, the market value may decrease. This fundamental economic concept applies directly to real estate, where fluctuations in market conditions, such as economic growth, demographic changes, and shifts in buyer preferences, can significantly affect property values. Understanding the dynamics of supply and demand helps real estate professionals assess market trends and property valuation accurately, making it a crucial principle in real estate economics. The other principles mentioned relate to different aspects of real estate but do not specifically address the relationship between the number of properties and buyers’ interests in determining market value.