Which economic principle suggests that market value is influenced by potential profit?

The principle that suggests that market value is influenced by potential profit is the economic principle of Anticipation. This principle holds that the value of a property is not solely based on present conditions, but rather on the benefits and income that one expects to receive from it in the future. When individuals consider purchasing a property, they look at the potential profit and anticipated income streams that the property can generate, which ultimately influences its market value.

In essence, the principle of Anticipation emphasizes the proactive nature of property investment, where expected future benefits shape current valuation. Investors and buyers weigh the potential returns against the costs and risks associated with the property, making this principle crucial in market evaluations and transactions.

As opposed to this, the principles of Contribution and Competition focus on different aspects of value determination. Contribution pertains to how much a component adds to the overall value of a property, while Competition revolves around how the market dynamics and the actions of similar properties impact value. The principle of Substitution deals with the idea that a property’s value is influenced by what a buyer is willing to pay for a comparable substitute, rather than the potential profit specifically tied to it.