Which economic principle would apply when an investor looks for properties with the highest profit potential?

The economic principle that applies when an investor looks for properties with the highest profit potential is rooted in the concept of competition. This principle suggests that the value of a property is influenced by the performance and pricing of comparable properties in the market. When multiple investors or developers are vying for properties with high profit potential, competition drives prices upward and impacts decisions regarding investment.

Investors assess the returns of similar properties and the competition they face, which can influence their willingness to bid on a property. A strong competitive environment may lead to innovative strategies and enhancements in property offerings as investors try to outdo one another, ultimately affecting value and potential returns.

In this context, understanding competition is key to making sound investment choices, as it helps investors identify not only the current market conditions but also potential future performance based on the actions of other market participants.